What changed
Previously, banks had to obtain UFCE certificates from entities on a quarterly basis, preferably audited. Now, if a listed entity cannot provide the latest quarter's UFCE data due to disclosure restrictions before account finalisation, banks may use the immediate preceding quarter's data for computing capital and provisioning requirements.
What it means for you
This change reduces compliance pressure on both banks and listed entities, as banks no longer need to chase for current quarter UFCE data that may not be available. It ensures capital and provisioning calculations remain feasible without penalising entities for timing mismatches, while all other UFCE guidelines stay unchanged.
What you must do
- Update internal UFCE data collection processes to allow use of prior quarter data for listed entities facing disclosure restrictions.
- Document cases where prior quarter data is used, including the reason and the quarter referenced.
- Ensure all other UFCE capital and provisioning requirements remain fully compliant.
- Communicate this flexibility to relevant credit and risk teams handling foreign currency exposures.
Who it affects
Scheduled Commercial Banks (excluding RRBs), Listed entities with unhedged foreign currency exposure, Credit risk and compliance teams at banks
Can we use prior quarter data for all entities or only listed ones?
The circular specifically addresses listed entities that cannot disclose current quarter UFCE data before finalising accounts. For other entities, the original quarterly self-certification requirement remains.
Does this change affect provisioning calculations permanently?
No, it is a temporary accommodation for the quarter where data is unavailable. Once the entity's accounts are finalised, banks should revert to using the latest available quarter data.
What if the prior quarter data is also not available?
The circular does not address that scenario. Banks should follow the original guidelines and consult RBI if needed, as this relaxation is only for the specific case of listed entities with disclosure restrictions.