RBI's Twelfth Amendment Directions, 2026 introduce a 2% risk weight on QCCP exposures for commercial banks and revise CVA capital charge methodologies effective April 2027.
RBI Amends QCCP Risk Weights and CVA Framework for Commercial Banks
The Reserve Bank of India has issued the Twelfth Amendment Directions, 2026, revising capital adequacy norms for commercial banks concerning exposures to Qualifying Central Counterparties (QCCPs). Effective 1 April 2027, specified trading exposures will carry a 2% risk weight, harmonizing with global risk standards and mitigating counterparty credit risk in derivatives markets.
The amendments also modify the treatment of incurred credit valuation adjustment (CVA) losses and update exposure at default (EAD) calculations under the CVA framework. These revisions form part of a broader regulatory alignment with Basel Committee standards, aimed at strengthening risk-based capital assessments for over-the-counter derivatives.
Additionally, separate amendment directions issued to small finance banks, payments banks, and all-India financial institutions (AIFIs) standardize the 2% risk weight across regulated entities. Legal advisors must review client portfolios involving derivative transactions and CCP exposures to ensure compliance with the revised capital reporting requirements from April 2027.
