The RBI has issued the Twelfth Amendment to Capital Adequacy Directions for Commercial Banks, refining legal opinion requirements and valuation adjustments for incurred losses.
RBI Updates Capital Adequacy Norms for Commercial Banks
On October 7, 2026, the RBI issued the Twelfth Amendment Directions to the Capital Adequacy framework for Commercial Banks. The amendment modifies paragraph 85(6)(i) and paragraph 213(2)(iv)(b) of the 2025 Directions, addressing two key areas: legal opinion requirements for clearing members and valuation adjustments for incurred credit losses.
The changes reflect a move towards more robust counterparty risk management, particularly in derivatives clearing. The revised valuation adjustments will impact how banks account for impaired exposures under the internal ratings-based (IRB) approach.
Additionally, the Fifth Amendment for All India Financial Institutions (AIFIs) and Third Amendment for Payments Banks harmonise legal opinion mandates across sectors. Legal teams must review custodial and clearing agreements to ensure compliance with updated prudential standards.