Reserve Bank of India (RBI) Notifies Market Risk Minimum Capital Directions 2026 under Basel III Framework

Key facts

• The Reserve Bank of India (RBI) issued the Reserve Bank of India (Commercial Banks - Minimum Capital Requirements for Market Risk) Directions, 2026 on September 21, 2026.
• The Directions align market risk guidelines with the revised Basel III framework while ensuring simplicity, flexibility and ease of adoption.
• The Directions will take effect from April 1, 2027, giving banks sufficient lead time.
• Trading book definition instructions were deleted with a reference made to the Investment Directions' 'Held for Trading (HFT)' sub-classification.
• Specific risk tables for interest rate risk were revised to align with Basel Committee on Banking Supervision (BCBS) guidelines.
• Capital treatment for debt mutual funds and exchange traded funds (ETF) held in the trading book was revised to be based on underlying risk drivers with sufficient guardrails.
• Instructions on positions hedged by credit derivatives were revised to include total return swaps treatment under the RBI (Credit Derivatives) Directions, 2026.