What changed
RBI inserted a note in paragraph 85(1) requiring banks to include CCR exposures of all entities required to be consolidated in terms of Section B of Chapter II when computing capital on a consolidated basis. Table 16 add-on factors for market-related off-balance sheet items were revised, with new categories for precious metals (except gold) and other commodities. Notes were added clarifying that add-on factors apply to all outstanding CCR exposures, and specifying treatment for clearing members of SEBI-recognized exchanges in equity derivatives and commodity derivatives segments. Risk weight for bank's trade exposure to a QCCP was set at 2% for own purposes and when offering clearing services, with a proviso that capital is not required for certain client transactions if a legal opinion is obtained.
What it means for you
Banks must now ensure consolidated CCR calculations capture all group entities, increasing capital requirements for some. Revised add-on factors may raise capital charges for longer-duration commodity and equity derivatives. The 2% risk weight for QCCP exposures provides clarity but may increase capital for banks acting as clearing members. Overall, alignment with international standards could lead to higher capital buffers for derivative exposures.
What you must do
- Update internal CCR computation models to include exposures from all consolidated entities as per Section B of Chapter II.
- Apply revised add-on factors from Table 16 for interest rate, FX, equity, precious metals, and other commodity contracts immediately.
- For contracts with reset dates, ensure residual maturity is set to next reset date and apply 0.50% floor for interest rate contracts with residual maturities of more than one year.
- If acting as clearing member for SEBI-recognized exchanges in equity derivatives and commodity derivatives segments, compute capital charge for CCR using the new add-on factors for equities, precious metals, and other commodities.
- Apply 2% risk weight to trade exposures with QCCPs for own purposes and when offering clearing services, and review capital treatment for client transactions, ensuring a legal opinion if not obligated to reimburse.
Who it affects
All commercial banks in India, Banks with consolidated group structures, Banks acting as clearing members of SEBI-recognized exchanges, Banks with significant OTC derivatives, exchange-traded derivatives, or SFT exposures
What is the effective date of these amendments?
The amendments come into effect from the date of issue, i.e., March 10, 2026.
Do the revised add-on factors apply to all outstanding CCR exposures?
Yes, note (e) clarifies that add-on factors in Table 16 apply to all outstanding counterparty credit risk exposures.
What risk weight applies to a bank's trade exposure to a QCCP?
A risk weight of 2% applies to the bank's trade exposure to a QCCP for its own purposes and when offering clearing services, subject to certain conditions.