RBI issues final Basel III market-risk capital rules for commercial banks: Simplified Standardised Approach from 1 April 2027
RBI has issued the Reserve Bank of India (Commercial Banks – Minimum Capital Requirements for Market Risk) Directions, 2026, finalising draft guidelines of 17 February 2023. Banks must use the Simplified Standardised Approach, with capital computed for interest rate, equity and foreign exchange risk. The Directions take effect from 1 April 2027.
Key facts
- In force
- 1 April 2027
- Who it affects
- Commercial banks (treasury, risk and capital teams); not Small Finance, Payments or Local Area Banks
- What it is
- Rule change
- Section
- FEMA & RBI
- Published
- 21 September 2026
In 30 seconds
- The Directions are dated 21 September 2026 and come into effect from 1 April 2027.
- They apply to commercial banks — not to Small Finance Banks, Payments Banks or Local Area Banks.
- Banks must use the Simplified Standardised Approach (SSA); market-risk RWA = capital requirement × 12.5.
- The trading book is whatever is classified as Held for Trading under the Investment Portfolio Directions, 2025.
- Equity: 9% specific risk on gross positions plus 9% general market risk on the net position. Foreign exchange and gold: 9% of the overall Net Open Position.
- Capital for market risk must be met on a continuous basis — at the close of each business day — at both solo and consolidated level.
हिंदी में सार
RBI ने 21 सितंबर 2026 को commercial banks के लिए बाज़ार जोखिम (market risk) पर न्यूनतम पूँजी के अंतिम निर्देश जारी किए हैं, जो 17 फ़रवरी 2023 के ड्राफ़्ट को अंतिम रूप देते हैं और 1 अप्रैल 2027 से लागू होंगे। बैंकों को Simplified Standardised Approach अपनानी होगी — ब्याज दर, इक्विटी और विदेशी मुद्रा जोखिम पर अलग-अलग पूँजी। इक्विटी पर 9% specific और 9% general market risk, तथा विदेशी मुद्रा व सोने पर कुल Net Open Position का 9% पूँजी प्रभार है।
What has been issued
On 21 September 2026 the Reserve Bank of India issued the Reserve Bank of India (Commercial Banks – Minimum Capital Requirements for Market Risk) Directions, 2026. They finalise the Draft Guidelines on Minimum Capital Requirements for Market Risk under Basel III, released on 17 February 2023.
RBI’s press release says the Directions align the market risk guidelines with the revised Basel III framework while keeping the regulations simple and easy to adopt. They take effect from 1 April 2027, to give banks lead time. Intermediate (transition) scalars, it notes, have been in effect since 1 April 2024.
Who is covered
All commercial banks — banking companies (other than Small Finance Banks, Payments Banks and Local Area Banks), corresponding new banks and the State Bank of India.
The framework in brief
| Area | What the Directions provide |
|---|---|
| Method | Simplified Standardised Approach. The capital requirement is the sum of the requirements for three risk classes — interest rate, equity and foreign exchange. Risk-weighted assets are that requirement multiplied by 12.5 |
| Trading book | All instruments classified as “Held for Trading” under the Investment Portfolio Directions, 2025. HTM, AFS, FVTPL (non-HFT) and investments in own subsidiaries, joint ventures and associates sit in the banking book |
| Scope | Interest rate and equity risk for trading book instruments; foreign exchange risk (including gold and precious metals) for both trading and banking book |
| Interest rate risk | Specific risk charge by issuer type and residual maturity (0% for Central and State Government securities and those guaranteed by the Central Government), plus a general market risk charge |
| Equity risk | 9% specific risk on gross equity positions and 9% general market risk on the overall net position, market by market |
| Foreign exchange risk | 9% of the overall Net Open Position, computed by the shorthand method; gold is included |
| Options | Simplified approach for banks that only buy options; delta-plus method or scenario approach for banks that also write options |
| Reclassification | No shifting between trading and banking book for regulatory arbitrage. If a reclassification lowers total capital, the difference is held as a disclosed Pillar 1 capital surcharge |
Banks may exclude certain structural foreign currency positions — such as capital invested in overseas branches and subsidiaries — from the Net Open Position, subject to conditions, including that the exclusion is made for at least six months.
Five changes from the 2023 draft
- Trading book scope: the draft’s own definition is deleted; the Directions refer to the Held for Trading sub-classification in the Investment Directions.
- Net Open Position and forex charge: the revised instructions in the Capital Adequacy Tenth Amendment Directions, 2026 are incorporated.
- Specific risk tables for interest rate risk: revised to align with Basel Committee guidelines.
- Debt mutual funds / ETFs in the trading book: capital is based on the underlying risk drivers, with guardrails. Open-ended funds with at least 90% of AUM in debt instruments, month-end constituent details and daily NAV get debt treatment; others are treated on par with equity.
- Credit-derivative hedges: treatment added for positions hedged by total return swaps.
Disclosure and repeal
Banks must make qualitative and quantitative Pillar 3 disclosures on market risk in the templates in Annex I. Once the Directions are implemented, Section D (except sub-section D.8) of Chapter IV of the Capital Adequacy Directions, 2025 stands repealed.
What banks should do
Use the period to 1 April 2027 to map Held for Trading portfolios to the three risk classes, document the policy for structural foreign exchange positions, and seek the Department of Supervision’s approval if a dedicated internal risk transfer desk for interest rate risk is planned.
Questions and answers
When do the new market-risk capital rules apply?
The Reserve Bank of India (Commercial Banks – Minimum Capital Requirements for Market Risk) Directions, 2026 come into effect from 1 April 2027.
Which banks are covered?
All commercial banks — banking companies other than Small Finance Banks, Payments Banks and Local Area Banks, corresponding new banks and the State Bank of India.
Which approach must banks use?
The Simplified Standardised Approach. The capital requirement is the simple sum of the requirements for interest rate risk, equity risk and foreign exchange risk, and risk-weighted assets are that amount multiplied by 12.5.
What is the capital charge on equity and foreign exchange positions?
Equity: 9 per cent specific risk on gross equity positions plus 9 per cent general market risk on the overall net position in each equity market. Foreign exchange, including gold: 9 per cent of the overall Net Open Position.
How are debt mutual funds held in the trading book treated?
Open-ended debt funds or ETFs investing not less than 90 per cent of AUM in debt instruments, with month-end constituent details, average modified duration and daily NAV available, attract specific risk as per the interest-rate table. Funds that do not meet these tests are treated on par with equity.
Published 21 September 2026. Updated 6 October 2026. This report is for general information and is not professional advice. Read the source document before acting on it.