RBI Overhauls Counterparty Credit Risk Capital Norms for Commercial Banks: Key Changes Under SA-CCR Effective April 1, 2027
The Reserve Bank of India has formally amended the regulatory framework governing minimum capital requirements for counterparty credit risk applicable to commercial banks. Issued vide Circular No. RBI/2026-27/284, DOR.MRG.REC.240/00-00-001/2026-27 dated October 7, 2026, the Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Amendment Directions, 2026 introduces significant structural and methodological changes aligned with prevailing international prudential standards.
The amendment operates under the authority vested in the RBI by Section 35A of the Banking Regulation Act, 1949 and modifies Chapters II and III of the Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Directions, 2025 dated November 28, 2025. The revised provisions will take effect from April 1, 2027.
Applicability: Who Must Comply?
The amended directions carry a differentiated applicability structure based on an institution's profile and exposure footprint.
Mandatory Application
The directions apply, on a consolidated group-wide basis, to:
- Commercial banks that maintain an international presence, or
- Commercial banks with a book value of outstanding derivatives of ₹25,000 crore or more as on the relevant reporting date
For such institutions, the Standardised Approach for Counterparty Credit Risk (SA-CCR) replaces the Current Exposure Method (CEM) as the prescribed methodology for computing regulatory exposure.
Optional Adoption
Commercial banks that do not fall within the mandatory applicability threshold retain the flexibility to adopt either CEM or SA-CCR in accordance with these directions. This optionality ensures that smaller or domestically-focused institutions are not unduly burdened while larger systemically significant banks are aligned with global best practices.
Structural Amendments to the 2025 Directions
The Amendment Directions introduce the following structural modifications to the Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Directions, 2025:
- The existing Annex has been redesignated as Annex 1
- Two new annexures — Annex 2 and Annex 3 — have been inserted after Annex 1
- Paragraphs 7 to 21 of the original directions are substituted by new paragraphs 6A to 21, incorporating an expanded definitional framework, revised scope of counterparty credit risk, and a detailed methodology for exposure measurement
Expanded Definitional Framework (Paragraph 6A)
A cornerstone of the revised directions is the comprehensive definitional architecture introduced under paragraph 6A. These definitions govern interpretation across the entire counterparty credit risk framework.
Key Definitions
Central Counterparty (CCP)
A clearing house that interposes itself between counterparties to contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer and thereby ensuring the future performance of open contracts. A CCP becomes counterparty to trades with market participants through novation, an open offer system, or another legally binding arrangement. For the purposes of the capital framework, a CCP is a financial institution.
Counterparty Credit Risk (CCR)
The risk that the counterparty to a transaction could default before the final settlement of the transaction's cash flows. An economic loss would occur if the transactions or portfolio of transactions with the counterparty has a positive economic value at the time of default. Unlike a firm's exposure to credit risk through a loan, where the exposure to credit risk is unilateral and only the lending bank faces the risk of loss, CCR creates a bilateral risk of loss: the market value of the transaction can be positive or negative to either counterparty to the transaction. The market value is uncertain and can vary over time with the movement of underlying market factors.