meta_id 3110024

On April 27, 2026, the Reserve Bank of India (RBI) issued the Reserve Bank of India (Commercial Banks – Capital Charge for Credit Risk – Standardised Approach) Directions, 2026, effective from April 1, 2027. The directions establish prudential norms for calculating risk-weighted assets for credit risk using the Standardised Approach (SA), as prescribed under the Basel III framework finalised by the Basel Committee on Banking Supervision in December 2017. The directions apply to commercial banks under RBI jurisdiction, excluding Small Finance Banks, Payments Banks, and Local Area Banks. The SA framework permits banks to assign risk weights to banking book exposures based on either prescribed risk weights for specific exposure categories or ratings assigned by eligible credit rating agencies (ECRAs). Key exposure classes include domestic and foreign sovereigns, banks, corporates, retail exposures, micro, small and medium enterprises (MSMEs), real estate, non-performing assets, and equity investments in funds. The directions introduce comprehensive requirements for credit risk mitigation, including collateralised transactions using the comprehensive approach, on-balance sheet netting, and guarantees. Banks must implement robust due diligence procedures to ensure risk weights align with internal credit assessments. The framework establishes specific risk weight tables for various counterparty types and maturity profiles, with adjustments based on observed default rates published by ECRAs. Housing loans to individuals attract differentiated risk weights based on loan-to-value ratios and loan sequencing. The directions also prescribe treatment for unhedged foreign currency exposures and securitisation exposures. Banks must comply with these directions from April 1, 2027, replacing corresponding provisions in the Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Directions, 2025.