The RBI introduced new directions on Credit Valuation Adjustment (CVA) framework for commercial banks to strengthen risk-based capital norms.
New CVA Framework for Commercial Banks
The Reserve Bank of India (RBI) issued the Commercial Banks – Credit Valuation Adjustment Framework) Directions, 2026 on October 7, 2026. These directions establish a comprehensive Credit Valuation Adjustment (CVA) framework to enhance capital adequacy norms related to counterparty credit risk in derivative transactions.
The framework introduces standardized methods for calculating CVA capital charges, improving alignment with Basel III recommendations. It applies to all commercial banks engaged in derivative trading and mandates regular reporting and stress testing of counterparty exposures.
Legal and compliance teams must integrate CVA risk assessments into internal governance models. The framework represents a significant step toward prudential supervision of market-linked exposures, requiring banks to strengthen both risk modeling and regulatory disclosures.
Citations
- Reserve Bank of India (Commercial Banks – Credit Valuation Adjustment Framework) Directions, 2026