The Reserve Bank of India issued the Reserve Bank of India (Small Finance Banks – Prudential Norms on Capital Adequacy) Third Amendment Directions, 2026 on March 10, 2026, to clarify the treatment of total Counterparty Credit Risk (CCR) exposures and align regulatory norms with international standards. Exercising powers under Banking Regulation Act, 1949, the RBI amended provisions in paragraph 75 of the 2025 Directions applicable to Small Finance Banks. The amendment replaces Table 14 by revising add-on factors for market-related off-balance sheet items across interest rate, exchange rate, equity, precious metals, and commodity contracts based on residual maturity. It also introduces clarifications on residual maturity calculation for contracts that periodically reset to zero market value and prescribes a minimum add-on factor for certain interest rate contracts. Additional notes specify CCR capital treatment for banks acting as clearing members of SEBI-recognised exchanges and clarify commodity classifications. The amendment also revises risk-weight rules for exposures to Qualified Central Counterparties (QCCPs).
Reserve Bank of India
RBI/2025-26/239
DOR.MRG.REC.No.434/21-01-002/2025-26 | Dated: March 10, 2026
Reserve Bank of India (Small Finance Banks – Prudential Norms on Capital Adequacy) Third Amendment Directions, 2026
Please refer to paragraph 75 on ‘Treatment of total Counterparty Credit Risk’ of the Reserve Bank of India (Small Finance Banks – Prudential Norms on Capital Adequacy) Directions, 2025. It has been decided to amend these instructions to provide greater clarity and to largely align the guidelines with international standards.
2. Accordingly, in exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949, and all other provisions / laws enabling the Reserve Bank of India (RBI) in this regard, RBI being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Amendment Directions hereinafter specified.
3. (i) These instructions shall be called the Reserve Bank of India (Small Finance Banks – Prudential Norms on Capital Adequacy) Third Amendment Directions, 2026.
(ii) These Amendment Directions shall come into effect from the date of issue.
4. The Reserve Bank of India (Small Finance Banks – Prudential Norms on Capital Adequacy) Directions, 2025. are amended as provided below.
4.1. Table 14 in paragraph 75(2) shall be substituted by the following, namely: –
| “Table 14: Add-on factors for market-related off-balance sheet items | |||||
| Add-on Factor (Per Cent) | |||||
| Interest Rate Contracts | Exchange Rate Contracts and Gold | Equities | Precious Metals except Gold | Other Commodities | |
| One year or less | 0.25 | 1.00 | 6.00 | 7.00 | 10.00 |
| Over one year to five years | 0.50 | 5.00 | 8.00 | 7.00 | 12.00 |
| Over five years | 1.50 | 7.50 | 10.00 | 8.00 | 15.00 |
”.
4.2. Note (b) in paragraph 75(2) shall be substituted by the following, namely: –
“For contracts that are structured to settle outstanding exposure following specified payment dates and where the terms are reset such that the market value of the contract is zero on these specified dates, the residual maturity shall be set equal to the time until the next reset date. However, in the case of interest rate contracts which have residual maturities of more than one year and meet the above criteria, the add-on factor shall be subject to a floor of 0.50 per cent.”.
4.3. The following notes shall be inserted after note (d) in paragraph 75(2), namely:–
“(e) Add-on factors as per Table 14 shall be applicable to all outstanding CCR exposures.
(f) A bank acting as a clearing member of SEBI-recognised stock exchanges in the equity derivatives and commodity derivatives segments shall compute and maintain capital charge for CCR, in terms of paragraph 75 of these Directions. The add-on factors prescribed in Table 14 for ‘Equities’, ‘Precious Metals except Gold’, and ‘Other Commodities’ are applicable only in such cases.
(g) In Table 14, ‘Precious Metals’ include Silver, Platinum and Palladium. ‘Other Commodities’ include energy contracts, agricultural contracts, base metals (e.g., aluminium, copper, and zinc), and any other non-precious metal commodity contracts.”.
4.4. In paragraph 75(5)(i), sub-paragraph (a) shall be substituted by the following, namely: –
“(a) Where a bank acts as a clearing member of a QCCP for its own purposes, a risk weight of 2 per cent shall be applied to the bank’s trade exposure to the QCCP in respect of OTC derivatives transactions, exchange traded derivatives transactions, and SFTs. Where the clearing member (bank) offers clearing services to clients, the 2 per cent risk weight also applies to the clearing member’s (bank) trade exposure to the QCCP that arises in cases where the clearing member (bank) is obligated to reimburse the client for any losses on such transactions in the event that the QCCP defaults.
Provided that, a clearing member (bank) is not required to maintain capital for such transactions, for the trade exposure to the QCCP, if it is not obligated to reimburse the client for such losses, provided the bank obtains and maintains an independent, written, and reasoned legal opinion that it is protected from any such liability in case of QCCP defaults.”.
(Sunil T S Nair)
Chief General Manager
