Reserve Bank of India amends AIFI capital adequacy rules on counterparty credit risk and QCCP clearing exposures

The Reserve Bank of India issued amendments to its capital adequacy framework for All India Financial Institutions (AIFIs), revising the treatment of total counterparty credit risk (CCR) to provide greater clarity and largely align the requirements with international standards, effective from the date of issue. For consolidated capital computation, an AIFI must include CCR exposures of all entities required to be consolidated under the framework’s scope of application. The amendments replace the CCR add-on factors for market-related off-balance sheet items across maturity buckets and asset classes, set how residual maturity is determined for certain contracts with resets (including a 0.50% floor for qualifying interest rate contracts with residual maturity over one year), and clarify that Table 13 add-on factors apply to all outstanding CCR exposures. AIFIs acting as clearing members of SEBI-recognised stock exchanges in equity and commodity derivatives must compute and maintain a CCR capital charge under the same paragraph 77 methodology, with commodity category definitions also specified. For exposures to a QCCP, a 2% risk weight applies to an AIFI’s trade exposure as a clearing member for OTC derivatives, exchange traded derivatives and SFTs, and also applies when client clearing involves an obligation to reimburse client losses in the event of QCCP default, with an exemption where no such obligation exists and an independent written, reasoned legal opinion is obtained and maintained.