What changed
A new Chapter II‑A – Credit Risk Evaluation has been inserted into the AIFI credit risk directions. Clause 5A now mandates that credit assessments must suitably incorporate the possible effects of calamities on borrowers. This amendment supersedes the earlier version of the directions.
What it means for you
AIFIs must now embed disaster‑risk considerations into their credit underwriting and monitoring processes. Risk models, scoring criteria and documentation will need to reflect the likelihood and severity of calamities affecting borrowers. This could lead to revised risk weights and higher provisioning for exposure in vulnerable regions.
What you must do
- Revise credit risk policies to include calamity impact assessment.
- Update credit scoring models and risk rating frameworks with disaster‑risk parameters.
- Train credit officers and risk teams on evaluating and monitoring calamity exposure.
- Incorporate scenario analysis for natural disasters in loan approval workflows.
- Report the updated credit risk methodology to the RBI as per existing compliance timelines.
Who it affects
All India Financial Institutions (AIFIs), Credit risk and underwriting teams, Risk management committees, Borrowers located in disaster‑prone areas
From when must AIFIs start applying the new calamity‑impact requirement?
The requirement is effective from 1 July 2026. All credit assessments from that date onward must incorporate calamity risk.
Does the amendment apply to existing loan portfolios?
The RBI directive focuses on credit assessments for new exposures. However, institutions are encouraged to review existing portfolios for calamity risk and adjust monitoring as needed.
What sources can be used to gauge calamity impact on a borrower?
Institutions may use government disaster data, climate risk indices, historical loss records, and borrower‑provided contingency plans to evaluate potential calamity effects.