RBI issues Directions on Minimum Capital Requirements for Market Risk under Basel III for Commercial Banks
The Reserve Bank of India had issued Draft Guidelines on Minimum Capital Requirements for Market Risk – under Basel III on February 17, 2023 , seeking stakeholder feedback. The draft guidelines proposed adoption of the Simplified Standardised Approach (SSA) for computing capital requirement for market risk under the revised Basel III framework. 2. Feedback received on the draft guidelines has…
On February 17, 2023, the Reserve Bank of India released draft guidelines on Minimum Capital Requirements for Market Risk under the Basel III framework for commercial banks. These guidelines proposed the use of the Simplified Standardized Approach (SSA) for calculating market risk capital requirements. After receiving feedback, the Reserve Bank of India modified the draft and issued the final Reserve Bank of India (Commercial Banks - Minimum Capital Requirements for Market Risk) Directions, 2026 on April 1, 2026.
These directions aim to align market risk guidelines with the revised Basel III framework, while maintaining simplicity and providing flexibility for banks. The key changes in the final directions from the draft include the deletion of the trading book definition, revision of net open position and forex risk capital charges, and updating specific risk tables for interest rate risk to align with Basel Committee on Banking Supervision (BCBS) guidelines.
The directions will take effect from April 1, 2027, providing banks sufficient time for a smooth transition.
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