PRUDENTIAL NORMS FOR OFF- BALANCE SHEET EXPOSURES OF BANKS - BILATERAL NETTING OF COUNTERPARTY CREDIT EXPOSURES

Since the legal position regarding bilateral netting is not unambiguously clear, it has been decided
that bilateral netting of mark-to-market (MTM) values rising on the account of such derivative
contracts cannot be permitted. Accordingly, banks should count their gross positive MTM value of
such contracts for the purpose of capital adequacy as well as for exposure norms.