Summary: The Reserve Bank of India (RBI) has issued the Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Amendment Directions, 2026, through Circular No. RBI/2026-27/284, DOR.MRG.REC.240/00-00-001/2026-27, dated October 7, 2026. Issued under Section 35A of the Banking Regulation Act, 1949, the amendment revises Chapters II and III of the Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Directions, 2025, dated November 28, 2025, to align the methodology for minimum capital requirements for counterparty credit risk more closely with international standards. The amended provisions will come into effect on April 1, 2027.
The Directions apply, on a consolidated group-wide basis, to commercial banks having an international presence or outstanding derivatives with a book value of ₹25,000 crore or more as on the reporting date. Other commercial banks may choose between the Current Exposure Method (CEM) and the Standardised Approach for Counterparty Credit Risk (SA-CCR). For banks subject to mandatory application, SA-CCR replaces CEM for the relevant regulatory exposure calculations.
The amendments introduce detailed definitions, prescribe the scope of counterparty credit risk exposures, and establish methodologies for over-the-counter derivatives, exchange-traded derivatives, long-settlement transactions and securities financing transactions. The SA-CCR framework measures exposure using replacement cost and potential future exposure, with an alpha multiplier of 1.4. It distinguishes margined and unmargined netting sets, recognises qualifying collateral and legally enforceable netting arrangements, and prescribes asset-class-specific calculations for interest rate, foreign exchange, credit, equity and commodity derivatives.
The revised framework also addresses exposures to central counterparties, including qualifying central counterparties, clearing members, client transactions, initial margins and default fund contributions. It provides supervisory parameters, risk-weighting methodologies and detailed computational illustrations through the annexures. The existing Annex is redesignated as Annex 1, with Annexes 2 and 3 added. These changes establish a more comprehensive and standardised framework for measuring counterparty credit risk and determining associated regulatory capital requirements.
RESERVE BANK OF INDIA
RBI/2026-27/284
DOR.MRG.REC.240/00-00-001/2026-27 | Dated: October 7, 2026
Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Amendment Directions, 2026
Please refer to Chapter II & III of the Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Directions, 2025 dated November 28, 2025, which specify the methodology for minimum capital requirements for counterparty credit risk. Upon review and to ensure greater alignment with international standards, there is a felt need to amend these instructions.
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) to issue instructions in this regard, the 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 (Commercial Banks – Forthcoming Instructions) Amendment Directions, 2026.
ii. These Amendment Directions shall come into effect from April 1, 2027.
iii. These Amendment Directions shall be applicable to commercial banks with an international presence or with book value of derivative outstanding of ₹ 25,000 crore and above as on the reporting date, on a consolidated group wide basis. However, remaining commercial banks may choose to adopt either the Current Exposure Method (CEM) or the Standardised Approach for Counterparty Credit Risk (SA-CCR) as per these Directions.
4. The Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Directions, 2025, are amended as provided below:
i. The existing Annex shall be renamed Annex 1, and two new annexures viz. Annex 2 and Annex 3 respectively shall be inserted.
ii. In the Directions, the paragraphs 7 to 21 are hereby substituted by paragraphs 6A to 21, while Annex 2 and 3 are inserted after Annex 1, as detailed below: –
“ A. Definitions
6 A. In these Directions, unless the context states otherwise, the terms herein shall bear the meanings assigned to them below:
1. ‘Central Counterparty’ (CCP) is a clearing house that interposes itself between counterparties to contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer and thereby ensuring the future performance of open contracts. A CCP becomes counterparty to trades with market participants through novation, an open offer system, or another legally binding arrangement. For the purposes of the capital framework, a CCP is a financial institution.
2. ’Clearing Member’ is a member of, or a direct participant in, a CCP that is entitled to enter into a transaction with the CCP, regardless of whether it enters into trades with a CCP for its own hedging, investment, or speculative purposes or whether it also enters into trades as a financial intermediary between the CCP and other market participants.
Explanation: For the purpose of these Directions, where a CCP has a link to a second CCP, that second CCP is to be treated as a clearing member of the first CCP. Whether the second CCP’s collateral contribution to the first CCP is treated as initial margin or a default fund contribution will depend upon the legal arrangement between the CCPs. In such cases, RBI shall be consulted for determining the treatment of such initial margin and default fund contributions.
3.‘Client’ is a party to a transaction with a CCP through either a clearing member acting as a financial intermediary, or a clearing member guaranteeing the performance of the client to the CCP.
4. ‘Counterparty Credit Risk (CCR)’ is the risk that the counterparty to a transaction could default before the final settlement of the transaction’s cash flows. An economic loss would occur if the transactions or portfolio of transactions with the counterparty has a positive economic value at the time of default. Unlike a firm’s exposure to credit risk through a loan, where the exposure to credit risk is unilateral and only the lending bank faces the risk of loss, CCR creates a bilateral risk of loss : the market value of the transaction can be positive or negative to either counterparty to the transaction. The market value is uncertain and can vary over time with the movement of underlying market factors.
5. ‘Credit Valuation Adjustment’ is an adjustment to the mid-market valuation of the portfolio of trades with a counterparty. This adjustment reflects the market value of the credit risk of the counterparty or the market value of the credit risk of both the bank and the counterparty.
6. ‘Cross-product netting’ refers to the inclusion of transactions of different product categories within the same netting set.
7. ‘Current Exposure’ is the larger of zero, or the current market value of a transaction or portfolio of transactions within a netting set with a counterparty that would be lost upon the immediate default of the counterparty, assuming no recovery on the value of those transactions in bankruptcy. Current exposure is often also called Replacement Cost.
8. ‘Default funds’, also known as clearing deposits or guarantee fund contributions (or any other names), are clearing members’ funded or unfunded contributions towards, or underwriting of, a CCP’s mutualised loss sharing arrangements. The description given by a CCP to its mutualised loss sharing arrangements is not determinative of their status as a default fund; rather, the substance of such arrangements will govern their status.
9. ‘Hedging Set’ is a set of transactions within a single netting set within which full or partial offsetting is recognized for the purpose of calculating the Potential Future Exposure (PFE) add-on of the standardised approach for counterparty credit risk (SA-CCR).
10. ‘Independent Collateral Amount’ (ICA) means (i) the collateral other than variation margin posted by the counterparty that the bank may seize upon default of the counterparty, the amount of which does not change in response to the value of the transactions it secures and / or (ii) the Independent Amount (IA) parameter as defined in standard industry documentation. ICA can change in response to factors such as the value of the collateral or a change in the number of transactions in the netting set.
Explanation: For example, the 1992 (Multicurrency-Cross Border) Master Agreement and the 2002 Master Agreement published by the International Swaps & Derivatives Association, Inc. (ISDA) Master Agreement. The ISDA Master Agreement includes the ISDA Credit Support Annexes : the 1994 Credit Support Annex (Security Interest – New York Law), or, as applicable, the 1995 Credit Support Annex (Transfer – English Law) and the 1995 Credit Support Deed (Security Interest – English Law).
11. ‘Initial margin’, in relation to exposures to a CCP, means a clearing member’s or client’s funded collateral posted to the CCP to mitigate the PFE of the CCP to the clearing member arising from the possible future change in the value of their transactions. For the purposes of calculation of counterparty credit risk capital requirements, initial margin does not include contributions to a CCP for mutualised loss sharing arrangements (i.e., in case a CCP uses initial margin to mutualise losses among the clearing members, it shall be treated as a default fund exposure). Initial margin also includes collateral deposited by a clearing member or client in excess of the minimum amount required, provided the CCP or clearing member may, in appropriate cases, prevent the clearing member or client from withdrawing such excess collateral.
12. ‘Long settlement transactions’ are transactions where a counterparty undertakes to deliver a security, a commodity, or a foreign exchange amount against cash, other financial instruments, or commodities, or vice versa, at a settlement or delivery date that is contractually specified as more than the lower of the market standard for this particular instrument and five business days after the date on which the bank enters into the transaction.
13. ‘Margining Agreement’ is a contractual agreement or provisions to an agreement under which one counterparty must supply variation margin to a second counterparty when an exposure of that second counterparty to the first counterparty exceeds a specified level.
14. ‘Margin lending transactions’ are transactions in which a bank extends credit in connection with the purchase, sale, carrying or trading of securities. They do not include other loans that happen to be secured by securities collateral. Generally, in such transactions, the loan amount is collateralised by securities whose value is greater than the amount of the loan.
15. ‘Margined netting sets’ are netting sets covered by a margin agreement under which the bank’s counterparty has to post variation margin; all other netting sets, including those covered by a one-way margin agreement where only the bank posts variation margin, are treated as unmargined netting sets for the purposes of SA-CCR.
16. ‘Margin period of risk’ is the time period from the last exchange of collateral covering a netting set of transactions with a defaulting counterparty until that counterparty is closed out and the resulting market risk is re-hedged.
17. ‘Margin threshold’ is the largest amount of an exposure that remains outstanding until one party has the right to call for variation margin.
18. ’Multi-level client structure’ is one in which a bank can centrally clear as indirect client; that is, when clearing services are provided to the bank by an institution which is not a direct clearing member but is itself a client of a clearing member or another clearing client. For exposures between clients and clients of clients, the term higher-level client is used for the institution providing clearing services; and the term lower-level client is used for the institution clearing through that client.
19. ‘Netting Set’ is a group of transactions with a single counterparty that are subject to a legally enforceable bilateral netting arrangement and for which netting is recognised for regulatory capital purposes. Each transaction that is not subject to a legally enforceable bilateral netting arrangement that is recognised for regulatory capital purposes should be interpreted as its own netting set for the purpose of these Directions.
20. ‘Net Independent Collateral Amount’ (NICA) represents the amount of collateral that a bank may use to offset its exposure on the default of the counterparty. It means the amount of segregated or unsegregated collateral posted by the counterparty to the bank, less the unsegregated collateral posted by the bank to the counterparty. With respect to ‘Independent Amount’ parameter defined in standard industry documentation, NICA takes into account the differential of Independent Amount required for the bank minus Independent Amount required for the counterparty.
21. ‘Offsetting transaction’ means the transaction leg between the clearing member and the CCP when the clearing member acts on behalf of a client (e.g., when a clearing member clears or novates a client’s trade).
22. ‘One-Sided Credit Valuation Adjustment’ is a credit valuation adjustment that reflects the market value of the credit risk of the counterparty to the bank but does not reflect the market value of the credit risk of the bank to the counterparty.
23. ‘Qualifying central counterparty’ (QCCP) is an entity that is licensed to operate as a CCP (including a license granted by way of confirming an exemption) and is permitted by the appropriate regulator / overseer to operate as such with respect to the products offered. This is subject to the provision that the CCP is based and prudentially supervised in a jurisdiction where the relevant regulator / overseer has established, and publicly indicated that it applies to the CCP on an ongoing basis, domestic rules and regulations that are consistent with the Principles for Financial Market Infrastructures issued by the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions. In addition, for a CCP to be considered a QCCP, the requirements of paragraphs 17.4(a) and 17.4(b) of these Directions must be met to permit each clearing member bank to calculate its capital requirement for its default fund exposures in accordance with paragraphs 17 to 20 of these Directions.
24. ‘Securities Financing Transactions’ (SFTs) are transactions such as repurchase agreements, reverse repurchase agreements, security lending and borrowing, and margin lending transactions, where the value of the transactions depends on market valuations and the transactions are often subject to margin agreements.
25. ‘Trade exposures’ include the current and potential future exposure of a clearing member or a client to a CCP arising from over-the-counter derivatives, exchange traded derivatives transactions, or securities financing transactions, as well as initial margin. For the purpose of this definition, the current exposure of a clearing member includes the variation margin due to the clearing member but not yet received.
26. ‘Variation margin’ means a clearing member’s or client’s funded collateral posted at a fixed periodicity (e.g., daily or intraday basis) to a CCP based upon price movements of their transactions.
B Scope of counterparty credit risk
6 B. The scope of application of counterparty credit risk shall be as under:
(1) A bank shall calculate counterparty credit risk charge for all exposures that give rise to counterparty credit risk, with the exception of those transactions listed in paragraph 6B(2) of these Directions below.
i. The categories of transactions that give rise to counterparty credit risk are over the counter (OTC) derivatives, exchange-traded derivatives, securities financing transactions, and long-settlement transactions in the banking book.
ii. The categories of transactions include OTC derivatives, repo-style and other transactions booked in the trading book, separate from the capital requirement for market risk. The risk weights used in this calculation shall be consistent with those used for calculating the capital requirements in the banking book. Thus, a bank shall use the risk weights as per standardised approach for credit risk in the trading book. The calculation of the counterparty credit risk charge for collateralised OTC derivative transactions is the same as the rules prescribed for such transactions booked in the banking book.
Explanation: The treatment for unsettled foreign exchange and securities trades shall be as provided in paragraph 86 of the Commercial Banks – Prudential Norms on Capital Adequacy Directions, 2025.
(2) Exemptions and Caps
i. For ‘sold options’ and for ‘credit default swaps’ that are outside netting and margin agreements and where the bank is the protection seller, a bank may cap the counterparty credit risk exposure at the amount of unpaid premia. For such derivative transactions which are within a netting set and subject to margin agreements, a bank may remove such derivative transactions from their legal netting sets and treat them as individual unmargined transactions in order to apply the cap.
ii. While applying the counterparty credit risk charge, a bank may exclude credit default swaps (CDS) protection purchased by the bank against a banking book exposure, where the capital requirement for the hedged exposure is deemed to have been substituted as provided in paragraph 129 of the Commercial Banks – Prudential Norms on Capital Adequacy Directions, 2025.
(iii) A bank may defer premium on options subject to the following:
(a) A bank may, at its discretion, defer the premium on permissible options (generic or structured) sold by it to users subject to the following conditions:
a. the bank shall satisfy itself that the user is able to adhere to the premium deferment schedule, in accordance with its Board / Risk Management Committee of the Board approved policy in this regard, before extending this facility to the users;
b. the deferment of premium shall not extend beyond the maturity date of the original contract; and
c. the premium shall be received uniformly over the maturity of the contract and the periodicity of such payment shall be at least once in a quarter.
Provided that, the above facility shall not be available to an intermediary bank which does not have its own option book but offers the product to corporate clients on a completely covered basis, since an intermediary bank itself is not a ‘user’.
Provided further that, options and option structures shall continue to be governed by instructions on suitability and appropriateness laid down in the Master Direction – Reserve Bank of India (Market-makers in OTC Derivatives) Directions, 2021.
(b) A bank shall include the amount of premium deferred on options, as per sub-para (a) above, in the Replacement Cost (RC) for calculation of CCR exposure.
(c) While computing the credit exposure, a bank may exclude ‘sold options’ that are outside netting and margin agreements, provided the entire premium / fee or any other form of income is received / realised. For ‘sold options’ (outside netting and margin agreements) where the premium / fee or any other form of income is not fully received / realised, the PFE add-on amount shall be capped such that the CCR exposure (i.e., RC + PFE) does not exceed such unpaid amounts.
C. Methodology to calculate counterparty credit risk
6 C. A bank shall calculate counterparty credit exposure using the following methods:
1. For exposure arising from OTC derivatives, exchange-traded derivatives, and long settlement transactions, standardised approach for measuring counterparty credit risk exposures (SA-CCR) as set out in paragraphs 10 to 14 of these Directions. This treatment is applicable to transactions booked in both banking and trading book.
2. For securities financing transactions (SFTs), a bank shall apply the methodology as provided in paragraphs 157 to 165 of the Commercial Banks – Prudential Norms on Capital Adequacy Directions, 2025. This treatment is applicable to transactions booked in both banking and trading book.
3. For exposures that are cleared through a CCP, a bank shall apply the methodology as provided in paragraphs 15 to 20 of these Directions.
7. A bank shall ensure that the exposure amount for a given counterparty, under the methods outlined above, is equal to the sum of the exposure amounts calculated for each netting set with that counterparty, subject to the exception outlined in paragraph 8 of these Directions.
8. A bank shall ensure that the exposure amount for a given OTC derivative counterparty is the greater of zero and the difference between the sum of exposure amounts across all netting sets with the counterparty and the credit valuation adjustment (CVA) for that counterparty which has already been recognised by the bank as an incurred write-down (i.e., a CVA loss). A bank shall calculate CVA loss as a prudent valuation adjustment as per paragraph 213 of the Commercial Banks – Prudential Norms on Capital Adequacy Directions, 2025, without taking into account any offsetting debit valuation adjustments (DVA) which have been deducted from capital (in terms of paragraph 28(5) of the Commercial Banks – Prudential Norms on Capital Adequacy Directions, 2025). This reduction of exposure by incurred CVA losses does not apply to the determination of the CVA risk capital requirement.
9. A bank shall calculate the risk weighted assets for counterparty credit risk by multiplying the applicable risk weight and the exposure amount for the counterparty.
