The Reserve Bank of India issued amendment directions updating the capital adequacy framework for payments banks, revising the treatment of total counterparty credit risk to provide greater clarity and largely align with international standards. The changes replace Table 10 add-on factors for market-related off-balance sheet items for exchange rate contracts and gold, setting factors of 1.00% for one year or less, 5.00% for over one year to five years, and 7.50% for over five years, and clarify that these add-on factors apply to all outstanding counterparty credit risk exposures. The amendments also revise the capital treatment for exposures to a QCCP, applying a 2% risk weight to a clearing member bank’s trade exposure for OTC derivatives, exchange traded derivatives and SFTs, including client clearing where the bank is obligated to reimburse client losses if the QCCP defaults, with an exemption where the bank is not obligated to reimburse and holds an independent written and reasoned legal opinion confirming protection from such liability. The amendments take effect from the date of issue and modify the Reserve Bank of India (Payments Banks - Prudential Norms on Capital Adequacy) Directions, 2025.
Reserve Bank of India 2026-03-10
Reserve Bank of India sets 2 percent risk weight for payments banks QCCP trade exposures and clarifies counterparty credit risk add-ons
The Reserve Bank of India has updated the capital adequacy framework for payments banks, aligning it more closely with international standards. Key changes include revised add-on factors for market-related off-balance sheet items and a 2% risk weight for exposures to a Qualified Central Counterparty (QCCP) under specific conditions. These amendments are effective immediately and modify the 2025 Prudential Norms on Capital Adequacy.