The Reserve Bank of India has announced new capital requirements for banks’ market-risk positions, aligning with Basel III standards and setting the stage for a comprehensive overhaul of risk management practices by April 2027.
India’s central bank has set out new capital rules for banks’ market-risk positions, tightening the treatment of trading-book exposures while giving lenders more than a year to prepare for the change. The Reserve Bank of India said the framework will take effect on 1 April 2027 and is intended to align domestic rules with the revised Basel III standards, while keeping the approach simpler and easier for banks to adopt.
Under the new directions, commercial banks will be barred from moving instruments between the trading book and the banking book if the aim is to reduce capital requirements through regulatory arbitrage. The RBI said banks must use the simplified standardised approach to calculate risk-weighted assets for market risk, with those assets derived by multiplying the capital charge by 12.5.
The central bank also revised the specific risk tables for interest-rate exposures to match the Basel Committee on Banking Supervision’s guidelines more closely. In addition, it changed the capital treatment for debt mutual funds and exchange-traded funds held in the trading book so that the calculation reflects the underlying risk drivers, while still keeping safeguards in place.
According to reports from Moneycontrol and Business Standard, the rules apply to all commercial banks except small finance banks, payments banks and local area banks. The RBI has already been using intermediate transition scalars since 1 April 2024, which suggests regulators have been trying to ease the shift towards the final framework rather than forcing a sudden adjustment.
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