The Reserve Bank of India has issued a draft circular proposing revised instructions on Counterparty Credit Risk (CCR) under the Basel III Capital Regulations. The draft aims to clarify that banks serving as clearing members of SEBI-recognized stock exchanges must maintain a capital charge for CCR in equity and commodity derivatives segments. It also seeks to align the add-on factors for calculating Potential Future Exposure (PFE) with international standards set by the Basel Committee on Banking Supervision (BCBS), reflecting current market conditions. The proposed changes update the credit conversion factors for various market-related off-balance sheet items, including interest rate contracts, exchange rate contracts, and equities. The RBI has invited comments from banks, market participants, and other stakeholders on the draft circular until September 10, 2025.
Reserve Bank of India
RBI invites public comments on the draft circular on ‘Counterparty Credit Risk: Add-on factors for computation of Potential Future Exposure – Revised Instructions’
Please refer to instructions on Counterparty Credit Risk (CCR) as contained in paragraph 5.15.3 of the Master Circular DOR.CAP.REC.2/21.06.201/2025-26 dated April 1, 2025 on ‘Basel III Capital Regulations’. Reserve Bank has released today the draft circular on Counterparty Credit Risk: Add-on factors for computation of Potential Future Exposure – Revised Instructions which modifies the aforementioned instructions.
The comments on the draft circular are invited from the banks, market participants, and other interested parties till September 10, 2025. The comments/ feedback may be submitted through the link under the ‘Connect 2 Regulate’ Section available on the Reserve Bank’s website or may alternatively be forwarded to
The Chief General Manager-in-Charge
Market Risk Group
Department of Regulation, Central Office
Reserve Bank of India, 12th Floor
Shahid Bhagat Singh Marg
Fort Mumbai – 400 001
Or
by email
With the subject line ‘Feedback on Counterparty Credit Risk: Add-on factors for computation of Potential Future Exposure – Revised Instructions’
Background and Objective
Extant instructions on capital adequacy for banks prescribe the Current Exposure Method (CEM) for computation of Counterparty Credit Risk (CCR). The Reserve Bank has reviewed these instructions to (i) clarify that banks acting as clearing members of SEBI recognised stock exchanges in the equity derivatives and commodity derivatives segments are required to maintain capital charge for CCR; and (ii) largely align the add-on factors for calculation of Potential Future Exposure (PFE) in the CEM for ‘Interest Rate Contracts’ and ‘Exchange Rate Contracts and Gold’ with the Basel Committee on Banking Supervision (BCBS) guidelines, reflecting the development and depth of the respective market segments since the guidelines were last revised in August 2008.
(Puneet Pancholy)
Chief General Manager
Press Release: 2025-2026/942
Draft for Comments
RBI/2025-26/
DOR.MRG.REC.No. /00-00-020/2025-26
XX, 2025
All Scheduled Commercial Banks (excluding Payments Banks and Regional Rural Banks)
Dear Sir/ Madam,
Counterparty Credit Risk: Add-on factors for computation of Potential Future Exposure – Revised Instructions – Draft
Please refer to the circular DBOD.No.BP.BC.31/21.04.157/2008-09 dated August 8, 2008 on ‘Prudential Norms for Off-Balance Sheet Exposures of Banks’ incorporated in the Master Circular DOR.CAP.REC.2/21.06.201/2025-26 dated April 1, 2025on ‘Basel III Capital Regulations’ (hereinafter referred to as the Basel III Master Circular) and thecircular DBR.NBD.No.26/16.13.218/2016-17 dated October 6, 2016 on ‘Operating Guidelines for Small Finance Banks’.
2. Banks acting as clearing members of SEBI recognised stock exchanges in the equity derivatives and commodity derivatives segments are hereby advised to compute and maintain capital charge for Counterparty Credit Risk (CCR), in terms of paragraph 5.15.3 on “Treatment of Total Counterparty Credit Risk” of the Basel III Master Circular. Further, the add-on factors for calculation of Potential Future Exposure (PFE) under the Current Exposure Method (CEM) for computation of capital charge for CCR are being revised to largely align with the Basel Committee on Banking Supervision (BCBS) guidelines.
3. Accordingly, the instructions on Counterparty Credit Risk have been amended vide the Reserve Bank of India (Counterparty Credit Risk: Add-on factors for computation of Potential Future Exposure) (Amendment) Directions, 2025.
Yours faithfully,
(Usha Janakiraman)
Chief General Manager-in-Charge
Draft for Comments
RBI/2025-26/
DOR.MRG.REC.No. /00-00-020/2025-26
XX, 2025
Reserve Bank of India (Counterparty Credit Risk: Add-on factors for computation of Potential Future Exposure) (Amendment) Directions, 2025 – Draft
The Reserve Bank had issued the circular on ‘Prudential Norms for Off-Balance Sheet Exposures of Banks’ dated August 8, 2008 which has been incorporated in the Master Circular dated April 1, 2025 on ‘Basel III Capital Regulations’ (hereinafter referred to as the Basel III Master Circular). The Reserve Bank had also issued the circular on ‘Operating Guidelines for Small Finance Banks’ dated October 6, 2016. There is a need 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 of this Act or any other laws enabling the Reserve Bank to issue instructions in this regard, the Reserve Bank being satisfied that it is necessary and expedient in the public interest to do so, hereby issues these instructions to amend the extant instructions as given hereunder.
3. (i) These instructions shall be called the Reserve Bank of India (Counterparty Credit Risk: Add-on factors for computation of Potential Future Exposure) (Amendment) Directions, 2025.
(ii) The amended instructions shall come into effect on the day these are placed on the official website of the Reserve Bank of India.
4. The Table included under Annex 2 of the circular dated August 8, 2008(incorporated as Table 9 under paragraph 5.15.3.4 of the Basel III Master Circular) is hereby substituted by the following, namely: –
| Table 9: Credit Conversion Factors for Market-Related Off-Balance Sheet Items | |||||
| Credit Conversion Factors (%) | |||||
| 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 |
| * Applicable only in respect of CCR exposures of eligible banks acting as clearing members of SEBI recognised stock exchanges in the equity derivatives and commodity derivatives segments | |||||
(Usha Janakiraman)
Chief General Manager-in-Charge
