RBI has revised the methodology for minimum capital requirements for counterparty credit risk in commercial banks to align with international standards.
RBI Updates Counterparty Credit Risk Capital Methodology
The Reserve Bank of India, on October 7, 2026, issued the 'Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Amendment Directions, 2026', amending Chapters II and III of the 2025 Directions. The revisions refine the methodology for calculating minimum capital requirements for counterparty credit risk, particularly in derivative exposures.
The updated framework enhances alignment with the Basel Committee’s standards on credit valuation adjustments (CVA) and introduces more granular risk-weighting for centrally cleared and bilateral derivatives. This ensures capital requirements reflect the actual risk profile of counterparties and market conditions.
Implication for Practitioners: Banks must recalibrate their capital modeling tools and validate assumptions used in CCR calculations. Legal advisors should assess implications for master agreements (e.g., ISDA) and margin documentation in light of increased capital sensitivity to counterparty ratings and collateral terms.
Citations
- Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Amendment Directions, 2026