Single Entity Approach

The single entity approach is a regulatory framework in which a group of legally separate but economically connected entities—such as a bank and its subsidiaries, or a conglomerate and its related companies—is treated as one consolidated unit for the purpose of exposure limits, capital adequacy, and credit risk assessment. In India, the Reserve Bank of India applies the single entity approach in its large exposure framework (LEF) regulations to prevent excessive concentration of credit to a single group. This framework helps regulators and investors understand the true consolidated risk profile of complex corporate structures and related-party lending relationships.