The Reserve Bank of India (RBI) has issued the Commercial Banks – Minimum Capital Requirements for Market Risk Directions, 2026, effective from 1 April 2027, to align India’s market risk framework with revised Basel III standards. The Directions apply to all commercial banks, including small finance banks, payment banks, local area banks, and SBI. Banks will be required to maintain adequate capital against risks arising from interest rate, foreign exchange, equity, commodity price movements, and trading book exposures. The framework clearly distinguishes between banking and trading books and mandates continuous day-to-day compliance with market risk capital requirements. Banks must compute market risk capital using the Simplified Standardized Approach (SSA) and make enhanced qualitative and quantitative disclosures under the Basel III Pillar 3 framework. The Directions also prevent double counting of capital and permit limited exclusions for certain structural foreign currency investments. Consequent to the new framework, RBI has prospectively repealed specified market risk capital provisions under the 2025 Capital Adequacy Direction.
