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Informist, Tuesday, Mar. 10, 2026

--RBI issues amended counterparty credit risk norms 

 

NEW DELHI – The Reserve Bank of India on Tuesday issued final norms on counterparty credit risk, clarifying that banks acting as clearing members of Securities and Exchange Board of India-recognised stock exchanges in equity and commodity derivatives segments must maintain capital charges for counterparty credit risk. The norms, effective Tuesday, also align add-on factors for calculating potential future exposure in 'interest rate contracts' and 'exchange rate contracts and gold' with Basel Committee guidelines, the central bank said.

 

The RBI has accepted feedback suggesting clarification on the applicability of guidelines to clearing exposures of broking subsidiaries within banking groups. A note has been added stating that 'regulated entities' will include counterparty credit risk exposures of all entities required to be consolidated under the Basel III framework when computing capital on a consolidated basis.

 

The central bank has reduced the floor for add-on factors on interest rate contracts with residual maturities over one year to 0.50% from 1.00%, aligning with revised add-on factors in the amendment directions. "It has been clarified that all counterparty credit risk exposures outstanding on the date of final issuance of these amendment directions will be subject to the PFE (potential future exposure) revised add-on factors as per the amendment directions," the RBI said.

 

The RBI has clarified the definition of 'precious metals', listing specific metals or commodities under 'precious metals' and 'other commodities' under the new directions. "Precious metals' include silver, platinum and palladium, while 'other commodities' include energy contracts, agricultural contracts, base metals (aluminium, copper, and zinc), and any other non-precious metal commodity contracts.".

 

Under amended directions, the central bank clarified that clearing members are not required to maintain capital for trade exposures to qualifying central counterparties if they are not liable for qualifying central counterparties defaults, aligning with Basel III norms. As a safeguard, this exemption requires a written legal opinion confirming the clearing member's protection from liability in case of qualifying central counterparties defaults.

 

The RBI has declined a request to allow reduced add-on factors for contracts with variation margin credit support annex or collateralised credit support annex arrangements, citing the current exposure method approach. Such benefits may be considered under the proposed standardised approach for counterparty credit risk framework.  End

 

Reported by Vaishali Tyagi

Edited by Ashish Shirke

 

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