The Reserve Bank of India (RBI) has given commercial banks until April 1, 2027, to adopt its revised framework for minimum capital requirements for market risk. The final directions aim to align Indian regulations with the revised Basel III standards while ensuring simplicity and flexibility in implementation.
The RBI issued the Reserve Bank of India (Commercial Banks – Minimum Capital Requirements for Market Risk) Directions, 2026, on Monday after examining feedback on the draft guidelines released in February 2023.
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The revised framework will come into effect on April 1, 2027. Intermediate transition scalars have been in effect since April 1, 2024, to facilitate a smooth transition.
Among the key changes, the RBI has removed instructions defining the trading book, as its Investment Directions already identify it under the Held for Trading (HFT) accounting sub-classification. The final directions instead refer to the relevant Investment Directions.
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The framework also incorporates revised instructions on net open positions and foreign exchange risk capital charges, in line with the RBI's Commercial Banks – Prudential Norms on Capital Adequacy Tenth Amendment Directions, 2026.
For interest rate risk, the RBI has revised the specific risk tables to align them with guidelines issued by the Basel Committee on Banking Supervision (BCBS). The central bank said the revised treatment provides a more concise framework.
The capital treatment for debt mutual funds and exchange-traded funds held in the trading book has also been revised. Banks will calculate capital requirements based on underlying risk drivers while maintaining adequate safeguards.
The directions further revise the rules for positions hedged through credit derivatives to include positions hedged through total return swaps, where permitted under the RBI's Credit Derivatives Directions, 2026.
The final framework follows the RBI's February 2023 draft, which proposed adopting the Simplified Standardised Approach (SSA) to calculate market risk capital requirements under the revised Basel III framework.
