Summary: The Reserve Bank of India (RBI) has issued the Reserve Bank of India (Small Finance Banks – Prudential Norms on Capital Adequacy) Sixth Amendment Directions, 2026, through Circular No. RBI/2026-27/287, DOR.MRG.REC.No.243/00-00-001/2026-27, dated 7 October 2026. The amendment modifies paragraph 75(5)(i)(a) of the Reserve Bank of India (Small Finance Banks – Prudential Norms on Capital Adequacy) Directions, 2025. RBI has undertaken the revision following a review of the existing requirement for clearing member banks to obtain legal opinions, with the objective of aligning the regulatory framework with international standards.
The revised provision prescribes a risk weight of 2 per cent where a bank acts as a clearing member of a Qualifying Central Counterparty (QCCP) for its own purposes. The specified risk weight applies to the bank’s trade exposure to the QCCP arising from over-the-counter (OTC) derivatives transactions, exchange-traded derivatives transactions and securities financing transactions (SFTs). The amendment clarifies the applicable regulatory capital treatment for these categories of transactions and is relevant to the calculation of risk-weighted exposures under the prudential capital adequacy framework.
The amendment also addresses the treatment of trade exposures where a clearing member bank offers clearing services to clients. In such circumstances, the 2 per cent risk weight applies to the clearing member bank’s trade exposure to the QCCP where the bank is obligated to reimburse the client for losses on the relevant transactions if the QCCP defaults. Accordingly, the specified treatment extends to qualifying client-clearing arrangements involving an obligation on the clearing member bank to compensate clients in the event of a QCCP default. The revised provision is relevant to the broader capital requirements for banks’ exposures to central counterparties.
The Amendment Directions have been issued under Section 35A of the Banking Regulation Act, 1949, together with other enabling statutory provisions. They take effect from 7 October 2026, being the date of issue. The amendment replaces the specified sub-paragraph of the 2025 Directions and does not expressly amend other provisions. Small finance banks acting as clearing members of qualifying central counterparties must therefore consider the revised risk-weight treatment when determining regulatory capital requirements for the covered exposures.
RESERVE BANK OF INDIA
RBI/2026-27/28
DOR.MRG.REC.No.243/00-00-001/2026-27 | Dated: October 7, 2026
Reserve Bank of India (Small Finance Banks – Prudential Norms on Capital Adequacy) Sixth Amendment Directions, 2026
Please refer to paragraph 75(5) (i) of the Reserve Bank of India (Small Finance Banks – Prudential Norms on Capital Adequacy) Directions, 2025, on the requirement for clearing member banks to obtain legal opinion. On a review, it has been decided to amend these Directions to align them with international standards.
2. Accordingly, in exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949 (hereinafter called the Act) and all other provisions / laws enabling the Reserve Bank in this regard, the Reserve Bank, 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) Sixth 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 In paragraph 75(5)(i), sub-paragraph (a) shall be replaced 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.”.
(Sunil T S Nair)
Chief General Manager
