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pc nid 92229 Apr 28, 2026 pthandapani@vixio.com India Reserve Bank of India horizon scanning
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India's Reserve Bank Issues Final Directions on Basel III Capital Charge for Credit Risk

On April 27, 2026, the Reserve Bank of India (RBI) issued final directions on Basel III capital charge requirements for credit risk under the standardised approach for scheduled commercial banks. The RBI had previously released draft directions on October 7, 2025, proposing amendments to the existing standardised approach framework for calculating capital charge for credit risk. The draft directions sought to enhance the robustness, granularity, and risk sensitivity of the framework while achieving convergence with international standards. Following stakeholder consultation, the RBI examined feedback received and incorporated modifications into the final directions. The Reserve Bank of India (Scheduled Commercial Banks - Capital Charge for Credit Risk – Standardised Approach) Directions, 2026 will apply to scheduled commercial banks operating in India. These directions establish updated requirements for how banks must calculate capital charges when assessing credit risk using the standardised approach, replacing or amending previous capital charge methodologies. The framework aims to strengthen the capital adequacy standards for Indian banks and align domestic regulatory requirements with global Basel III standards. The directions become effective on April 1, 2027, providing banks with a transition period to implement the new capital charge calculations and adjust their risk management frameworks accordingly. REFERENCES: Reserve Bank of India Press Release: RBI issues Final Directions on Basel III - Capital Charge for Credit Risk under Standardised Approach (April 27, 2026) https://www.rbi.org.in/

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Reserve Bank of India Issues Directions on Basel III Capital Charge for Credit Risk for Commercial Banks

The Reserve Bank of India (RBI) has released the Reserve Bank of India (Commercial Banks - Capital Charge for Credit Risk - Standardised Approach) Directions, 2026. The directions prescribe: Sovereign and public sector exposures including mandating a 0 percent risk weight for domestic sovereign exposures such as the central government and the RBI, while assigning a 20 percent risk weight to claims guaranteed by state governments. Corporate and NBFC parameters stipulating that unrated claims on corporates and NBFCs with an aggregate exposure from the banking system exceeding INR 5,000,000,000 (USD 60,000,000) will attract a risk weight of 150 percent, and mandating that NBFC-CICs shall always be risk weighted at 100 percent. Retail and MSME exposure specifications requiring that claims included in the regulatory retail portfolio receive a 75 percent risk weight, provided the maximum aggregated exposure to one counterparty does not exceed the absolute threshold of INR 100,000,000 (USD 1,200,000), and assigning a 125 percent risk weight to personal loans and non-transactor credit card receivables excluded from this portfolio. Unrated micro, small and medium enterprises (MSME) exposures meeting retail criteria are weighted at 75 percent, while other unrated MSME exposures not meeting the criteria attract 85 percent. Real estate and NPA rules establishing specific risk weights based on loan-to-value (LTV) ratios for housing loans to individuals , assigning risk weights of 100 percent or 150 percent for commercial real estate (ADC) exposures, and stipulating that the unsecured portion of non-performing assets (NPAs) attracts a 150 percent risk weight if specific provisions are less than 20 percent of the outstanding amount. Credit risk mitigation (CRM) and external ratings mandating that banks use the comprehensive approach with standard supervisory haircuts for collateralized transactions, requiring an 8 percent standard supervisory haircut for currency mismatches between exposure and collateral , and requiring banks to adjust base risk weights based on the average one-year observed default rate (ODR) published by chosen eligible credit rating agencies (ECRAs). The directions will come into effect from April 1, 2027.