The Reserve Bank of India issued a second set of amendments to its Commercial Banks – Credit Risk Management Directions, updating how banks may classify country risk pending a shift to internal ratings, revising requirements for monitoring and capitalising unhedged foreign currency exposure, and aligning working capital loan repayment flexibilities with the 2026 asset classification and provisioning framework. Until banks move to an internal rating system, they may use the seven-category country classification of Export Credit Guarantee Corporation of India Ltd. (ECGC), with ECGC providing quarterly updates and interim notifications of major changes. For Unhedged Foreign Currency Exposure, banks must assess and monitor exposures and hold adequate capital, with incremental capital requirements applied over and above the applicable standardised approach risk weights only when Potential Loss to EBID exceeds 75 percent, triggering a 25 percentage point increase in risk weight. The incremental requirement must be calculated at least quarterly, based on the total exposure amount used for credit risk capital, using projected average annual EBID over three years for projects under implementation and new entities, and placing exposures in the highest bucket if sufficient data are not available. Banks, consortia and syndicates also gain discretion to structure WCL repayment in instalments or as a bullet and may consider rollovers at the borrower’s request, subject to the relevant asset classification and stressed asset resolution directions. The amendments take effect from April 1, 2027.
Reserve Bank of India 2026-04-27
Reserve Bank of India amends commercial banks’ credit risk management directions with revised unhedged foreign currency exposure capital treatment effective April 2027
The Reserve Bank of India issued a second set of amendments to its Commercial Banks – Credit Risk Management Directions, covering country risk classification, unhedged foreign currency exposure and working capital loan repayment structures. Banks may use the Export Credit Guarantee Corporation of India Ltd. seven-category country classification until internal ratings are adopted, must hold incremental capital for unhedged foreign currency exposure only when potential loss to EBID exceeds 75 percent, and gain flexibility to structure and roll over working capital loans subject to asset classification and stressed asset resolution rules. The amendments take effect from April 1, 2027.