Document Title: RBI Issues Directions on Minimum Capital Requirements for Market Risk under Basel III for Commercial Banks

Issuing Authority: Reserve Bank of India

Reference: Press Release 2026-2027/1158

Date: 21 September 2026

Banking and Credit

The Reserve Bank of India has issued final Directions on Minimum Capital Requirements for Market Risk under the revised Basel III framework. The Directions adopt the Simplified Standardised Approach (SSA) for computing market‑risk capital and will take effect from 1 April 2027, providing banks a transition period. Intermediate transition scalars have been applicable since 1 April 2024 to facilitate a smooth shift to the new methodology.

Regulatory and Policy Measures

The Directions incorporate several substantive changes compared with the February 17 2023 draft guidelines. (1) The definition of the trading book has been removed, with reference now made to the Investment Directions that clearly identify the trading book under the ‘Held for Trading (HFT)’ subclassification. (2) Instructions on Net Open Position and the forex‑risk capital charge have been updated in line with the Tenth Amendment Directions 2026 to the RBI Prudential Norms on Capital Adequacy. (3) Specific‑risk capital charge tables for interest‑rate risk have been revised to align with the Basel Committee on Banking Supervision (BCBS) guidelines, offering a more concise treatment. (4) The capital treatment for debt mutual funds and exchange‑traded funds (ETFs) held in the trading book has been modified to base capital computation on underlying risk drivers while maintaining appropriate guardrails. (5) The capital requirement for positions hedged by credit derivatives now includes treatment for positions hedged by total‑return swaps, as permitted under the Credit Derivatives Directions 2026.

The Directions were issued after examining feedback received on the draft guidelines, as detailed in the annex to the circular. The press release is signed by Chief General Manager Brij Raj. This regulatory update aims to align Indian commercial banks with international Basel III standards while ensuring simplicity, flexibility, and ease of adoption.