RBI issued final Directions on the Credit Valuation Adjustment (CVA) Framework and amended the Standardised Approach for Counterparty Credit Risk (SA-CCR), revising capital charge norms for commercial banks.
RBI Issues Final Directions on CVA and SA-CCR Reforms
The Reserve Bank of India has issued final Directions on the 'Credit Valuation Adjustment (CVA) Framework' and 'Standardised Approach for Counterparty Credit Risk (SA-CCR)', following stakeholder consultations on draft proposals issued in June and August 2026.
CVA Framework
The final CVA Framework allows eligible banks to adopt a simpler approach for calculating capital charges on CVA risk. It enhances risk sensitivity by introducing differentiated supervisory risk weights based on counterparty sectors. These revisions aim to align Indian banks with Basel III standards, particularly in measuring mark-to-market exposures in derivative portfolios.
SA-CCR Amendments
The amended SA-CCR Directions clarify the scope of counterparty credit risk for both banking and trading books. They refine the methodology for computing exposure at default, especially for non-cleared derivatives, to improve accuracy and prudential consistency.
Implication: These directions are critical for banks’ capital planning and compliance teams. Legal counsel must review internal risk frameworks to ensure alignment with the updated regulatory capital rules. Non-compliance may attract supervisory action under the RBI’s powers under Section 35A of the Banking Regulation Act, 1949.
Citations
- Banking Regulation Act, 1949, s 35A