meta_id 3106003

On April 27, 2026, the Reserve Bank of India (RBI) issued the Reserve Bank of India (Commercial Banks – Credit Risk Management) - Second Amendment Directions, 2026, modifying the Commercial Banks – Credit Risk Management Directions, 2025. The amendments follow the issuance of the Reserve Bank of India (Commercial Banks - Asset Classification, Provisioning and Income Recognition) Directions, 2026 and are issued under Section 35A of the Banking Regulation Act, 1949. The amendments introduce several key modifications to credit risk management requirements for Indian commercial banks. The RBI clarified provisions relating to country classification, requiring the Export Credit Guarantee Corporation of India Ltd. (ECGC) to provide quarterly updates on country classifications and notify banks of significant interim changes. The directions modify requirements for assessing and monitoring Unhedged Foreign Currency Exposure (UFCE) of entities, with banks required to maintain adequate capital accordingly. A new incremental capital requirements framework has been established, applying a 25 percentage point increase in risk weight for entities with potential loss or earnings before interest and depreciation (EBID) exceeding 75 percent. Banks must calculate incremental capital requirements on a minimum quarterly basis, with specific provisions for projects under implementation and new entities based on projected average annual EBID for three years from commencement of commercial operations. The amendments also provide flexibility for banks to stipulate working capital loan repayments in instalments or as bullet repayments, subject to compliance with relevant asset classification and stressed asset resolution directions. The amendments become effective from April 1, 2027, providing commercial banks with approximately one year to implement the revised requirements.