What changed
- RBI modified paragraph 51 of the Directions to allow banks to use ECGC's seven-category classification for credit risk assessment.
- RBI introduced incremental capital requirements for unhedged foreign currency exposure (UCFE) and modified paragraph 56 to require banks to assess and monitor UCFE.
- RBI modified paragraph 58(3) and Table 1 to specify incremental capital requirements for UCFE, with a 25 percentage point increase in risk weight for exposures exceeding 75% potential loss/EBID.
What it means for you
- Banks must assess and monitor UCFE and maintain adequate capital for the same, with incremental capital requirements applied to all exposures to entities with UCFE.
- Banks have discretion to stipulate repayment of working capital loans (WCLs) in instalments or by way of 'bullet' repayment, subject to Reserve Bank of India (Commercial Banks - Asset Classification, Provisioning and Income Recognition) Directions, 2026 and Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Directions, 2025.
What you must do
- Review and update credit risk assessment processes to incorporate ECGC's seven-category classification.
- Assess and monitor UCFE and maintain adequate capital for the same.
- Apply incremental capital requirements to all exposures to entities with UCFE.
- Stipulate repayment of WCLs in instalments or by way of 'bullet' repayment, subject to Reserve Bank of India (Commercial Banks - Asset Classification, Provisioning and Income Recognition) Directions, 2026 and Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Directions, 2025.
Who it affects
Commercial banks, Export Credit Guarantee Corporation of India Ltd. (ECGC), Banks / consortia / syndicates
What is the purpose of the second amendment directions?
The purpose is to modify the Reserve Bank of India (Commercial Banks – Credit Risk Management) Directions, 2025, focusing on unhedged foreign currency exposure (UCFE) and incremental capital requirements.
What are the key changes introduced by the second amendment directions?
The key changes include modification of paragraph 51, introduction of incremental capital requirements for UCFE, and modification of paragraph 58(3) and Table 1.