RBI issues Directions on minimum capital requirements for market risk under Basel III for banks

The central bank said this move is part of its adoption of the Basel standards, while ensuring simplicity of regulations, and providing flexibility, and ease of adoption

The Reserve Bank of India on Monday issued Directions on minimum capital requirements for market risk under Basel III for commercial banks. This is aimed at aligning the market risk guidelines with the revised Basel III framework.

The central bank said this move is part of its adoption of the Basel standards, while ensuring simplicity of regulations, and providing flexibility, and ease of adoption.

“The Directions will take effect from April 1, 2027, ensuring sufficient lead time for banks. It may be noted that to ensure smooth transition, intermediate [transition] scalars have been in effect since April 1, 2024.” RBI said.

As per the Directions, a bank has the option to exclude certain structural foreign currency investments from the calculation of Net Open Position (NOP), on both standalone and consolidated basis.

The structural (i.e., non-dealing) investments, include capital investments and accumulated or unremitted surplus in overseas consolidated subsidiaries, joint ventures and associates, overseas branches, IFSC banking units, and offshore banking units in Special Economic Zones denominated in foreign currencies.

The aforementioned exclusion is limited to the amount that neutralises the sensitivity of the capital ratio to movements in exchange rates.

Trading book

Trading book, for the purpose of capital adequacy, shall include all instruments that are classified as ‘Held for Trading (HFT)’ as per Reserve Bank of India (Commercial Banks – Classification, Valuation, and Operation of Investment Portfolio) Directions, 2025.

All other items shall be included in the banking book and attract corresponding capital charge for credit risk (or counterparty credit risk, where applicable), per the Directions.

Accordingly, instruments classified under HTM, Available For Sale, Fair Value Through Profit or Loss (non-Held For Trading), and investments in own subsidiaries, joint ventures and associates shall be part of the banking book and shall not attract market risk capital charge.

The RBI said specific risk tables for interest rate risk have been revised to align with the Basel Committee on Banking Supervision (BCBS) guidelines, which also provides a more concise and clean treatment.

In the case of debt mutual funds or exchange traded funds (ETF) held in the trading book, the capital treatment has been revised to ensure capital computation is based on the underlying risk drivers while ensuring sufficient guardrails.

When it comes to specific risk capital requirement for positions hedged by credit derivatives, RBI said the instructions have been revised to include the treatment for positions hedged by total return swaps.

Published on September 21, 2026