Reserve Bank of India (Commercial Banks – Credit Valuation Adjustment Framework) Directions, 2026 · 07 Oct 2026

RBI/DOR/2026-27/474
DOR.MRG.REC.No.246/00-00-001/2026-27

October 7, 2026

Reserve Bank of India (Commercial Banks – Credit Valuation Adjustment Framework) Directions, 2026

Table of Contents

Introduction
Chapter I: Preliminary
A. Short Title and Commencement
B. Applicability
C. Definitions
Chapter II: Scope of Application
Chapter III: Approaches for CVA Risk Capital Charge
A. Basic Approach (BA-CVA)
B. Alternate Treatment
C. Capital Requirements and Risk Weighted Assets
Chapter IV: CVA risk capital charge under the BA-CVA
A. Reduced version of the BA-CVA
B. Full version of the BA-CVA
Chapter V: Capital Treatment of CVA Hedges
Chapter VI: Disclosures and Reporting Requirements
Chapter VII : Repeal
Annex 1
Annex 2

1. Table CVAA- General qualitative disclosure requirements
2. Template CVA1: The reduced basic approach for CVA (BA-CVA)
3. Template CVA2: The full basic approach for CVA (BA-CVA)

Introduction

In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949, and all other provisions / laws enabling the Reserve Bank of India (‘RBI’) in this regard, the RBI being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Directions hereinafter specified.

Chapter-I: Preliminary

A. Short Title and Commencement

1. These Directions shall be called the Reserve Bank of India (Commercial Banks – Credit Valuation Adjustment Framework) Directions, 2026.

2. These Directions shall come into effect from April 1, 2027.

B. Applicability

3. These Directions shall be applicable to Commercial Banks (hereinafter collectively referred to as 'banks' and individually as a 'bank').

For the purpose of these Directions, ‘Commercial Banks’ means banking companies (other than Small Finance Banks, Payments Banks, and Local Area Banks), corresponding new banks, and the State Bank of India, as defined respectively under clauses (c), (da), and (nc) of Section 5 of the Banking Regulation Act, 1949.

C. Definitions

4. In these Directions, unless the context states otherwise, the terms herein shall bear the meanings assigned to them below:

(1) ‘Banking Book’ shall have the same meaning as assigned to it in paragraph 4(1) of the Reserve Bank of India (Commercial Banks - Prudential Norms on Capital Adequacy) Directions, 2025.

(2) ‘Covered Transactions’ include all derivatives except those transacted directly with a qualified central counterparty (QCCP) and except those transactions meeting the conditions set out at paragraphs 85(6)(i)(f) and 85(6)(i)(g) of the Reserve Bank of India (Commercial Banks - Prudential Norms on Capital Adequacy) Directions, 2025 and paragraphs 16 (6) to 16(8) of the Reserve Bank of India (Commercial Banks - Forthcoming Instructions) Amendment Directions, 2026.

(3) ‘Credit Valuation Adjustment’ (CVA), is specified at a counterparty level, and reflects the adjustment to default risk-free price of a derivative or Security Financing Transaction (SFT) due to a potential default of the counterparty. It is an adjustment to the valuation of a derivative transaction or SFT to account for the credit risk of contracting parties. In the context of these Directions, it means regulatory CVA and may differ from accounting CVA, on account of the following:

• (a) regulatory CVA excludes the effect of the bank’s own default; and
• (b) constraints arising from best practices in accounting CVA which are imposed in computation of regulatory CVA.

(4) ‘CVA risk’ is the risk of losses arising from change in CVA values in response to changes in counterparty credit spreads and market risk factors that drive prices of derivative transactions and SFTs.

(5) ‘Derivative’ shall have the same meaning as assigned to it in Section 45U(a) of the RBI Act, 1934.

(6) ‘Netting Set’ shall have the same meaning as assigned to it in paragraph 4(23) of the Reserve Bank of India (Commercial Banks - Prudential Norms on Capital Adequacy) Directions, 2025.

(7) ‘Qualifying central counterparty’ (QCCP) shall have the same meaning as assigned to it in paragraph 4(29) of the Reserve Bank of India (Commercial Banks - Prudential Norms on Capital Adequacy) Directions, 2025.

(8) ‘Securities financing transaction’ (SFT) shall have the same meaning as assigned to it in paragraph 4(30) of the Reserve Bank of India (Commercial Banks - Prudential Norms on Capital Adequacy) Directions, 2025.

(9) ‘Trading Book’ shall have the same meaning as assigned to it in paragraph 4(34) of the Reserve Bank of India (Commercial Banks - Prudential Norms on Capital Adequacy) Directions, 2025.

5. All other expressions, unless defined herein, shall have the same meaning as have been assigned to them under the applicable Acts, rules / regulations made thereunder, or any statutory modification or re-enactment thereto, or as used in commercial parlance, as the case may be.

Chapter-II: Scope of Application

6. A bank shall calculate the capital requirements for Credit Valuation Adjustment (CVA) risk on a standalone basis for all covered transactions in both banking book and trading book. It includes CVA for a bank’s entire portfolio of covered transactions and eligible CVA hedges. Trades pertaining to SFTs shall be excluded from the calculation of the CVA capital charge.

Explanation: (1) Where a derivative transaction is subsequently novated to a QCCP, the resulting exposure upon novation shall be treated in the same manner as an exposure arising from a transaction undertaken directly with the QCCP and shall, accordingly, be excluded from the scope of Covered Transactions.

(2) A bank that is a clearing member of a CCP shall capitalise its CVA risk exposure to clients as bilateral trades, irrespective of whether the clearing member guarantees the trade or acts as an intermediary between the client and the CCP. However, to recognise the shorter close-out period applicable to cleared transactions, a clearing member may calculate its exposure to clients using an MPOR of at least five business days for the purpose of computing the exposure at default under the SA-CCR framework. The resulting exposure at default shall be used for the calculation of the CVA capital requirement.

(3) For the purposes of this paragraph, “Covered Transactions” shall include all eligible transactions of the bank globally, comprising transactions undertaken through both its domestic operations and overseas branches. Transactions booked through different branches of the bank with the same counterparty may be treated as part of a single netting set for CVA purposes only where the relevant netting agreement independently satisfies the applicable requirements for recognition as a netting agreement, including legal enforceability in all relevant jurisdictions in which such transactions are booked.

Chapter-III: Approaches for CVA Risk Capital Charge

A. Basic Approach (BA-CVA)

7. (1) A bank shall, for computation of capital charge for CVA, use the Basic Approach for Credit Valuation Adjustment (BA-CVA), as provided in Chapter IV of these Directions, subject to the exception provided in Section B under Chapter III of these Directions.

(2) The detailed illustrations for computation of CVA Framework are given in Annex I.

B. Alternate Treatment

8. A bank whose aggregate notional amount of non-centrally cleared derivatives, on a consolidated group-wide basis, is less than or equal to ₹10 lakh crore as at the reporting date, may opt not to calculate its CVA capital requirements using the BA-CVA and may instead adopt an alternative treatment.

Provided that, the supervisory authority may not permit this option for a bank, if it determines that CVA risk resulting from the bank’s derivative positions materially contributes to the bank’s overall risk.

Explanation: Where a bank exceeds the prescribed threshold as at the reporting date, it shall apply the BA-CVA with effect from that reporting date.