Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Amendment Directions, 2026 · 07 Oct 2026

RBI/2026-27/284 DOR.MRG.REC.240/00-00-001/2026-27 October 7, 2026

Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Amendment Directions, 2026

Please refer to Chapter II & III of the Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Directions, 2025 dated November 28, 2025, which specify the methodology for minimum capital requirements for counterparty credit risk. Upon review and to ensure greater alignment with international standards, there is a felt need to amend these instructions.

2. Accordingly, 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) to issue instructions in this regard, the RBI being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Amendment Directions hereinafter specified.

3. (i) These instructions shall be called the Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Amendment Directions, 2026.

• (ii) These Amendment Directions shall come into effect from April 1, 2027.
• (iii) These Amendment Directions shall be applicable to commercial banks with an international presence or with book value of derivative outstanding of ₹ 25,000 crore and above as on the reporting date, on a consolidated group wide basis. However, remaining commercial banks may choose to adopt either the Current Exposure Method (CEM) or the Standardised Approach for Counterparty Credit Risk (SA-CCR) as per these Directions.

4. The Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Directions, 2025, are amended as provided below:

• (i) The existing Annex shall be renamed Annex 1, and two new annexures viz. Annex 2 and Annex 3 respectively shall be inserted.
• (ii) In the Directions, the paragraphs 7 to 21 are hereby substituted by paragraphs 6A to 21, while Annex 2 and 3 are inserted after Annex 1, as detailed below: -

“ A. Definitions

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

(1) 'Central Counterparty’ (CCP) is a clearing house that interposes itself between counterparties to contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer and thereby ensuring the future performance of open contracts. A CCP becomes counterparty to trades with market participants through novation, an open offer system, or another legally binding arrangement. For the purposes of the capital framework, a CCP is a financial institution.

(2) ’Clearing Member’ is a member of, or a direct participant in, a CCP that is entitled to enter into a transaction with the CCP, regardless of whether it enters into trades with a CCP for its own hedging, investment, or speculative purposes or whether it also enters into trades as a financial intermediary between the CCP and other market participants.

Explanation: For the purpose of these Directions, where a CCP has a link to a second CCP, that second CCP is to be treated as a clearing member of the first CCP. Whether the second CCP’s collateral contribution to the first CCP is treated as initial margin or a default fund contribution will depend upon the legal arrangement between the CCPs. In such cases, RBI shall be consulted for determining the treatment of such initial margin and default fund contributions.

(3) ‘Client’ is a party to a transaction with a CCP through either a clearing member acting as a financial intermediary, or a clearing member guaranteeing the performance of the client to the CCP.

(4) ‘Counterparty Credit Risk (CCR)’ is the risk that the counterparty to a transaction could default before the final settlement of the transaction’s cash flows. An economic loss would occur if the transactions or portfolio of transactions with the counterparty has a positive economic value at the time of default. Unlike a firm’s exposure to credit risk through a loan, where the exposure to credit risk is unilateral and only the lending bank faces the risk of loss, CCR creates a bilateral risk of loss : the market value of the transaction can be positive or negative to either counterparty to the transaction. The market value is uncertain and can vary over time with the movement of underlying market factors.

(5) ‘Credit Valuation Adjustment’ is an adjustment to the mid-market valuation of the portfolio of trades with a counterparty. This adjustment reflects the market value of the credit risk of the counterparty or the market value of the credit risk of both the bank and the counterparty.

(6) ‘Cross-product netting’ refers to the inclusion of transactions of different product categories within the same netting set.

(7) ‘Current Exposure’ is the larger of zero, or the current market value of a transaction or portfolio of transactions within a netting set with a counterparty that would be lost upon the immediate default of the counterparty, assuming no recovery on the value of those transactions in bankruptcy. Current exposure is often also called Replacement Cost.

(8) ‘Default funds’, also known as clearing deposits or guarantee fund contributions (or any other names), are clearing members’ funded or unfunded contributions towards, or underwriting of, a CCP’s mutualised loss sharing arrangements. The description given by a CCP to its mutualised loss sharing arrangements is not determinative of their status as a default fund; rather, the substance of such arrangements will govern their status.

(9) ‘Hedging Set’ is a set of transactions within a single netting set within which full or partial offsetting is recognized for the purpose of calculating the Potential Future Exposure (PFE) add-on of the standardised approach for counterparty credit risk (SA-CCR).

(10) ‘Independent Collateral Amount’ (ICA) means (i) the collateral other than variation margin posted by the counterparty that the bank may seize upon default of the counterparty, the amount of which does not change in response to the value of the transactions it secures and / or (ii) the Independent Amount (IA) parameter as defined in standard industry documentation. ICA can change in response to factors such as the value of the collateral or a change in the number of transactions in the netting set.

Explanation: For example, the 1992 (Multicurrency-Cross Border) Master Agreement and the 2002 Master Agreement published by the International Swaps & Derivatives Association, Inc. (ISDA Master Agreement). The ISDA Master Agreement includes the ISDA Credit Support Annexes : the 1994 Credit Support Annex (Security Interest – New York Law), or, as applicable, the 1995 Credit Support Annex (Transfer – English Law) and the 1995 Credit Support Deed (Security Interest – English Law).

(11) ‘Initial margin’, in relation to exposures to a CCP, means a clearing member’s or client’s funded collateral posted to the CCP to mitigate the PFE of the CCP to the clearing member arising from the possible future change in the value of their transactions. For the purposes of calculation of counterparty credit risk capital requirements, initial margin does not include contributions to a CCP for mutualised loss sharing arrangements (i.e., in case a CCP uses initial margin to mutualise losses among the clearing members, it shall be treated as a default fund exposure). Initial margin also includes collateral deposited by a clearing member or client in excess of the minimum amount required, provided the CCP or clearing member may, in appropriate cases, prevent the clearing member or client from withdrawing such excess collateral.