RBI Deletes Deferment of Option Premium Clause from Commercial Bank Directions: Effective 1 April 2027
The Reserve Bank of India has formally issued the Reserve Bank of India (Commercial Banks – Miscellaneous) Amendment Directions, 2026 via Circular No. RBI/2026-27/285, DOR.MRG.REC.No.241/00-00-001/2026-27, dated 7 October 2026. These Amendment Directions implement a focused but important change to the regulatory framework applicable to commercial banks, specifically targeting the rules on deferment of option premium.
The key outcome of this amendment is the deletion of Sub-section D of Chapter IV (Paragraph 38) of the Reserve Bank of India (Commercial Banks – Miscellaneous) Directions, 2025, which previously dealt with the regulatory treatment of deferred option premiums. The deletion will not be immediate; it has a deferred commencement date of 1 April 2027.
This change is part of RBI’s broader recalibration of rules relating to counterparty credit risk and prudential regulation of derivatives, and it aligns with the evolving Standardised Approach for Counterparty Credit Risk (SA-CCR) framework.
Regulatory Context of the Amendment
Background Directions Involved
The current amendment operates in the backdrop of two key sets of directions issued by the RBI:
- Reserve Bank of India (Commercial Banks – Miscellaneous) Directions, 2025
- Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Amendment Directions, 2026
The Miscellaneous Directions, 2025 contain a range of operational and prudential instructions for commercial banks, including specific provisions on options and related derivative products. Within these Directions, Sub-section D of Chapter IV (Paragraph 38) had laid down conditions relating to deferment of option premium.
Following the introduction of the Forthcoming Instructions Amendment Directions, 2026, RBI has revisited and realigned certain elements of the regulatory architecture, one outcome of which is the present removal of Paragraph 38.
Statutory Authority Invoked
The Reserve Bank of India (Commercial Banks – Miscellaneous) Amendment Directions, 2026 have been issued in exercise of the following statutory powers:
Section 35Aof the Banking Regulation Act, 1949; and- All other enabling provisions and applicable laws that authorize RBI to issue directions to banks in the interest of sound banking operations and public interest.
RBI has explicitly recorded that it is:
“…being satisfied that it is necessary and expedient in the public interest so to do…”
before issuing the Amendment Directions. This statement underscores that, in RBI’s assessment, the deletion of the deferment provision is aligned with broader prudential and systemic objectives.
Core Amendment: Deletion of Sub-section D of Chapter IV (Paragraph 38)
What Exactly Has Been Changed?
The Amendment Directions, 2026, make one targeted modification to the 2025 Directions:
“Sub-section D of Chapter IV (Paragraph 38) shall be deleted.”
This means that, with effect from 1 April 2027, the entire block of provisions contained in Sub-section D of Chapter IV, which deals with the deferment of option premium, will cease to form part of the Reserve Bank of India (Commercial Banks – Miscellaneous) Directions, 2025.
No replacement text, substitute paragraph or revised framework for deferred option premiums is introduced within this specific notification.