The Reserve Bank of India (RBI) has issued new directions prescribing minimum capital requirements for market risk under the Basel III framework for commercial banks. The new rules were issued on September 21, 2026, following stakeholder feedback on the draft guidelines released in February 2023.
The RBI (Commercial Banks - Minimum Capital Requirements for Market Risk) Directions, 2026 are aimed at aligning India's regulatory framework with the revised Basel III standards while keeping the rules practical and easier for banks to adopt.
New Market Risk Capital Rules to Take Effect from April 2027
The RBI has decided that the new Directions will come into effect from April 1, 2027. The regulator said the additional lead time will allow banks to prepare for implementation.
RBI also noted that intermediate transition scalars have already been applicable since April 1, 2024, supporting a gradual transition towards the revised framework.
Key Changes Under the Final Directions
The final framework includes several changes from the draft guidelines issued in 2023.
1. Trading Book Classification
The final Directions remove separate instructions on the definition of the trading book. Instead, they refer to the existing RBI Investment Directions, which provide an identifiable trading book under the Held for Trading (HFT) accounting sub-classification.
2. Forex Risk and Net Open Position
The RBI has incorporated revised instructions relating to the Net Open Position and forex risk capital charge , in line with the updated prudential norms on capital adequacy issued in 2026.
3. Interest Rate Risk
The specific risk tables applicable to interest rate risk have been revised to align with the Basel Committee on Banking Supervision (BCBS) guidelines. RBI said the revised approach also provides a more concise treatment of interest rate risk.
4. Debt Mutual Funds and ETFs
The capital treatment for debt mutual funds and exchange-traded funds held in the trading book has been revised. Capital computation will be based on the underlying risk drivers, while regulatory safeguards will continue to apply.
5. Credit Derivative-Hedged Positions
The Directions also update the treatment of positions hedged through credit derivatives. This includes provisions covering total return swaps , where such instruments are permitted under RBI's Credit Derivatives Directions, 2026.
What the New RBI Rules Mean for Banks
For commercial banks, the revised market risk framework is expected to bring their capital calculations more closely in line with the updated Basel III approach.
The RBI has also attempted to balance regulatory alignment with implementation practicality. By setting an April 1, 2027 effective date, banks have additional time to review their trading-book exposures, risk measurement systems and capital planning processes.
The latest Directions follow the RBI's consultation process that began with the February 2023 draft. The regulator said stakeholder feedback was examined and modifications were incorporated into the final framework.
RBI's Continued Basel III Alignment
The latest move forms part of RBI's broader adoption of Basel standards for India's banking sector. The revised framework focuses specifically on how banks should determine capital requirements for risks arising from market positions.
With the new Directions scheduled to take effect from April 2027, commercial banks will need to prepare for the revised methodology well ahead of the implementation date.
Click here to view the official copy of the Press Release
CAclubindia
