The RBI has updated the methodology for minimum capital requirements for counterparty credit risk in derivatives, aligning with Basel standards.
Harmonization with Basel Standards in Counterparty Risk
The Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Amendment Directions, 2026, issued on October 7, 2026, revise Chapters II and III of the 2025 Directions. The amendment updates the methodology for calculating minimum capital requirements for counterparty credit risk (CCR), incorporating changes aligned with Basel III standards as recommended by the Basel Committee on Banking Supervision.
The revised framework enhances risk sensitivity by refining the exposure-at-default (EAD) computation for over-the-counter derivatives and includes updated haircuts for non-centrally cleared repo transactions. These changes aim to strengthen bank-level risk measurement systems and promote financial stability.
Legal and compliance teams must ensure that internal models and credit valuation adjustments (CVA) frameworks are updated to reflect the new computation norms, particularly for derivatives desks and treasury operations.