Circular No. DOR.CRE.REC.453, Dated: 30.03.2026
The Reserve Bank of India (RBI), pursuant to the Credit Facilities Amendment Directions, 2026, has introduced amendments to the Prudential Norms on Capital Adequacy applicable to commercial banks and small finance banks.
1. Regulatory Context and Objective
The amendment is part of RBI’s ongoing efforts to strengthen risk management practices and capital adequacy frameworks. It provides clarity on the treatment of specific exposures arising from commitments made to clearing corporations.
2. Treatment of Irrevocable Payment Commitment (IPC)
The RBI has clarified that an Irrevocable Payment Commitment (IPC) issued to clearing corporations shall be treated as a financial guarantee.
Accordingly, such exposures will attract a Credit Conversion Factor (CCF) of 100%, reflecting the full potential risk associated with the commitment.
3. Capital Requirement and Exposure Classification
While IPCs are treated as financial guarantees, the capital requirement will be applicable only to the portion of exposure classified as Capital Market Exposure (CME).
This ensures that capital is not unnecessarily applied to non-relevant portions of exposure.
4. Applicable Risk Weight
The exposure identified as Capital Market Exposure (CME) shall carry a risk weight of 125% for the purpose of capital adequacy computation.
This higher risk weight reflects the inherent volatility and risk associated with capital market-related exposures.
5. Effective Date
These amendments shall come into effect from the earlier of:
- The date of implementation, or
- 1st July 2026
6. Conclusion
The revised norms bring greater clarity and precision in capital treatment of IPCs, aligning regulatory capital requirements with the actual risk profile of exposures, particularly in the context of capital market transactions.
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