Module: General Practice
Q109: Regarding the Regulatory Capital (Basel III) treatment for MSME exposures as per RBI guidelines updated in 2025, consider the following statements:
Regulatory Retail Portfolios generally attract a risk weight of 75 percent.
To encourage credit flow, the risk weight for Unrated non-retail MSME exposures was reduced from 100 percent to 85 percent.
Bank lending to Medium Enterprises is strictly excluded from Priority Sector Lending.
Which of the statements given above are correct?
To encourage credit flow, the risk weight for Unrated non-retail MSME exposures was reduced from 100 percent to 85 percent.
Bank lending to Medium Enterprises is strictly excluded from Priority Sector Lending.
Which of the statements given above are correct?
✅ Correct Answer: A
Statements 1 and 2 are correct.
MSME exposures that qualify as Regulatory Retail (typically aggregate exposure up to 7.5 Crore rupees) attract a preferential risk weight of 75 percent.
In a significant move to boost credit to small firms that lack external ratings, the RBI reduced the risk weight for Unrated MSME exposures (which do not fit the retail bucket) from 100 percent to 85 percent.
Statement 3 is incorrect because lending to Medium Enterprises is eligible for Priority Sector Lending (PSL) classification under the broader MSME target, although it does not qualify for the 7.5 percent Micro sub-target.
MSME exposures that qualify as Regulatory Retail (typically aggregate exposure up to 7.5 Crore rupees) attract a preferential risk weight of 75 percent.
In a significant move to boost credit to small firms that lack external ratings, the RBI reduced the risk weight for Unrated MSME exposures (which do not fit the retail bucket) from 100 percent to 85 percent.
Statement 3 is incorrect because lending to Medium Enterprises is eligible for Priority Sector Lending (PSL) classification under the broader MSME target, although it does not qualify for the 7.5 percent Micro sub-target.