RBI’s Revised Concentration Risk Management Directions, 2026 – Detailed Analysis for Commercial Banks

The Reserve Bank of India has significantly reshaped the concentration risk framework for commercial banks through the Reserve Bank of India (Commercial Banks – Concentration Risk Management) Amendment Directions, 2026 (Revised), issued on March 30, 2026 under the Banking Regulation Act, 1949. These revised directions operate in tandem with the Reserve Bank of India (Commercial Banks – Credit Facilities) Amendment Directions, 2026 (Revised) and will be applicable from July 1, 2026, or an earlier internal adoption date chosen by a bank.

The amendments introduce a more granular and comprehensive regime for Capital Market Exposures (CME), redefine relevant terms, recalibrate prudential ceilings, and streamline exclusions. The objective is to tighten risk controls around capital market-related exposures, particularly in light of evolving products, intermediaries, and leveraged structures such as acquisition finance and bridge finance.

The revised directions are issued in exercise of powers under:

  • Section 21 and Section 35A of the Banking Regulation Act, 1949
  • Along with other enabling statutory provisions vested in the Reserve Bank of India

These amendments modify the Reserve Bank of India (Commercial Banks – Concentration Risk Management) Directions, 2025 (referred to as “the Directions”) and align them with the updated framework under the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025.

Note: The revised amendment directions explicitly supersede the earlier Reserve Bank of India (Commercial Banks – Concentration Risk Management) Amendment Directions, 2026 dated February 13, 2026, with effect from the applicable date mentioned in the new framework.

2. Expanded and Harmonised Definitions

2.1 New Definitions Inserted in Chapter I – Preliminary

To ensure consistency across regulatory directions, RBI has imported several key definitions from its credit facilities framework into the concentration risk directions. The following new sub-paragraphs are inserted in paragraph 4 of Chapter I:

  • “Acquisition Finance”
    Will carry the same definition as given in the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025.

  • “Bridge Finance”
    Will also adopt the meaning provided in the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025.

  • “Capital Market Intermediaries (CMIs)”
    Defined identically to the term under the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025.

  • “Collateral Security” / “Collateral”
    Follows the definition in the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025.

  • “Non-debt Mutual Funds”
    Specifically refers to mutual fund schemes whose corpus is not entirely invested in debt instruments.

  • “Primary Security”
    Mirrors the definition in the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025.

Additionally, paragraph 4(8) in Chapter I stands deleted, indicating a clean-up or replacement of earlier language that is no longer aligned with the revised structure.

3. Strengthened Role of the Board – Intra-day Capital Market Limits

3.1 Modification in Chapter II – Role of the Board

Sub-subparagraph 6(1)(v) has been substituted to sharpen the Board’s responsibility over real-time capital market risk:

  • The Board-approved policy must explicitly provide for intra-day exposure limits to capital markets.
  • These intra-day limits must operate within the prudential ceilings for aggregate CME as prescribed in the revised directions.

This change compels banks to move beyond end-of-day exposure monitoring and introduce structured intra-day risk containment protocols.

4. Comprehensive Overhaul of Exposure Norms

The heart of the amendment lies in Chapter V – Exposure Norms, where the structure, scope, and quantification of CME have been significantly revised.

4.1 Deletion and Replacement of Earlier Provisions

  • Paragraph 95 is deleted outright.
  • New paragraph 95A, paragraph 98A, paragraph 101A, paragraph 107A, and paragraph 107B are inserted.
  • Several earlier sections and paragraphs (including 97, 98, 101, 102–107, A.1.4.2.2.1, A.1.4.2.2.2, A1.4.5, A.1.4.6, Section B, paragraph 109) are removed to simplify and modernise the CME framework.

5. Redefined Scope of Capital Market Exposure (CME) – Paragraph 95A

5.1 Broad Coverage of Direct and Indirect Exposures

Under paragraph 95A, CME now encompasses both direct investments and indirect exposures (fund-based and non-fund-based).