The Reserve Bank of India has amended its capital adequacy directions for small finance banks to update the prudential treatment of irrevocable payment commitments issued to clearing corporations of stock exchanges on behalf of clients. Under the revised approach, an irrevocable payment commitment remains a financial guarantee with a 100 percent credit conversion factor (CCF), but capital must be maintained only on the exposure recognised as capital market exposure (CME) under the Reserve Bank of India (Small Finance Banks - Concentration Risk Management) Directions, 2025, with a 125 percent risk weight applied to that CME amount. The change takes effect from the date a bank chooses to implement the Reserve Bank of India (Small Finance Banks – Credit Facilities) Amendment Directions, 2026 or from April 1, 2026, whichever is earlier.
Reserve Bank of India 2026-02-13
Reserve Bank of India revises small finance bank capital adequacy treatment for irrevocable payment commitments to clearing corporations
The Reserve Bank of India revised capital adequacy directions for small finance banks, updating the prudential treatment of irrevocable payment commitments to clearing corporations. These commitments remain financial guarantees with a 100 percent credit conversion factor, but capital must be maintained only on exposures recognized as capital market exposure under the 2025 Directions, with a 125 percent risk weight applied, effective from the bank's chosen implementation date or April 1, 2026, whichever is earlier.