The Reserve Bank has revised capital norms for financial and performance guarantees offered by banks. The applicable credit conversion factor or CCFfor determining the credit equivalent amount with regard to financial guarantees are revised to 100% of the value of the guarantee. While the CCF applicable to performance guarantee is fixed at 50% of the value of the guarantee. 

In a notification issued to banks, the RBI has indicated that financial guarantees will include guarantees for credit facilities; guarantees in lieu of repayment of financial securities; guarantees in lieu of margin requirements of exchanges, credit enhancements. 

This norm will also be applicable to guarantees towards revenue dues, taxes, duties, levies etc. in favour of tax/ customs / port / excise authorities and for disputed liabilities for litigation pending at courts and for securitisation transactions, among others. 

Performance guarantees include transaction-related contingencies that involve an irrevocable undertaking to pay a third party in the event the counterparty fails to fulfil a contractual non-financial obligation. 

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