The Reserve Bank of India (RBI), on November 28, 2025, issued the Reserve Bank of India (Commercial Banks – Credit Risk Management) Directions, 2025 to strengthen the prudential framework governing credit risk across commercial banks. The Directions apply to all commercial banks except SFBs, PBs and LABs, and provide a unified structure for managing credit risk through board-approved policies, credit evaluation standards, statutory and regulatory restrictions, country-risk management, rules on unhedged foreign currency exposure (UFCE), LEI requirements, property valuation norms, and the opening/operation of current and CC/OD accounts.
The Directions set detailed definitions for credit-related products and exposures including bank guarantees, bills purchased/discounted, CC/OD facilities, demand loans, term loans, personal loans, natural and financial hedges, and UFCE, while prescribing consistent evaluation practices for assessing borrower creditworthiness and repayment capacity. The framework also mandates robust systems for managing concentration risk, related-party exposures, country-risk classifications/limits, valuation by empanelled valuers, filings in CERSAI, and compliance with restrictions on lending to directors, major shareholders, and entities with substantial interest.
The framework further introduces comprehensive norms on UFCE—requiring banks to quantify UFCE for all borrowers, apply incremental provisioning/risk weights where exposures are unhedged, and ensure stricter monitoring for entities with significant forex exposures. It also codifies the loan-system rules for credit delivery (e.g., mandatory loan components for large working-capital facilities), lays down controls on opening and maintaining current accounts and CC/OD accounts, and repeals prior circulars superseded by these Directions.
[Notification No. RBI/DOR/2025-26/157]
