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RBI Issues Final Directions on Minimum Capital Requirements
The Reserve Bank of India (RBI) provides for final directions on minimum capital requirements for market risk. The revised framework applies to commercial banks, and provides for implementation by April 1, 2027, while providing for alignment with the revised Basel III standards.
RBI Final Directions on Minimum Capital Requirements:
| Dimension | Key Details |
|---|---|
| Trading book instructions | The framework provides for removal of specific instructions defining the trading book, as the RBI’s Investment Directions provide for an identifiable trading book through the Held for Trading (HFT) accounting sub-classification. |
| Net Open Position and forex risk charges | The framework provides for revised provisions relating to Net Open Position and foreign exchange risk capital charges, in line with the RBI’s Commercial Banks - Prudential Norms on Capital Adequacy Tenth Amendment Directions, 2026. |
| Interest rate risk tables | The framework provides for revision of the specific risk tables for interest rate risk to align with guidelines issued by the Basel Committee on Banking Supervision (BCBS). |
| Capital treatment in trading book | The framework provides for revised capital treatment of debt mutual funds and exchange-traded funds (ETFs) held in the trading book. |
| Capital calculation method | The framework provides for capital requirements to be calculated based on underlying risk drivers, and mandates appropriate safeguards. |
| Basel III: definition and authority | Basel III norms comprise a set of international banking regulations developed by the Basel Committee on Banking Supervision (BCBS). |
| Basel III: post-crisis context | Basel III norms provide for strengthening bank capital requirements, governance, and risk management following the 2007-2008 financial crisis. |
| Basel III: capital quality requirement | Basel III norms mandate that banks maintain a higher quality of capital. |
| Basel III: CET1 ratio | Basel III norms mandate that the Common Equity Tier 1 (CET1) ratio is at least 4.5% of risk-weighted assets (RWA). |
| Basel III: global CAR | Basel III norms mandate that the total Capital Adequacy Ratio (CAR) is 8% globally. |