The RBI has issued the Sixth Amendment to Prudential Norms on Capital Adequacy for Small Finance Banks, aligning legal opinion requirements for clearing members with international standards.
Capital Adequacy Revisions for Small Finance Banks
The Reserve Bank of India (RBI) issued the Reserve Bank of India (Small Finance Banks – Prudential Norms on Capital Adequacy) Sixth Amendment Directions, 2026 on October 7, 2026. The amendment revisits paragraph 75(5)(i) of the 2025 Directions, which mandates clearing member banks to obtain legal opinions for certain financial exposures.
Following a review, the RBI has modified the requirement to align with international supervisory norms, ensuring proportionality and risk-based compliance. The revised framework aims to reduce regulatory burden while maintaining the integrity of clearing arrangements in payment and settlement systems.
This amendment is part of broader harmonisation of capital adequacy norms across bank categories. Practitioners advising SFBs should reassess their compliance checklists and update legal documentation protocols for clearing activities accordingly.