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RBI has issued final directions on minimum capital requirements for market risk under the Basel III framework

ICICIdirect Research 22 Sep 2026 DISCLAIMER

News: As per exchange filings, RBI has issued final directions on minimum capital requirements for market risk under the Basel III framework, effective April 1, 2027. The framework adopts a Simplified Standardised Approach (SSA) for calculating market-risk RWAs across interest-rate, equity and foreign-exchange exposures, while clearly defining the boundary between banking and trading books. Instruments classified as Held for Trading will form part of the trading book, and banks will not be allowed to reclassify positions merely to reduce capital requirements without maintaining the resulting capital differential. RBI has also permitted qualifying structural foreign-currency positions to be excluded from Net Open Position calculations, subject to conditions and periodic recalibration, while market-risk capital requirements will need to be maintained on a continuous basis.

View: The revised framework should strengthen consistency and transparency in market-risk capital treatment and limit regulatory arbitrage between banking and trading books. Banks with relatively larger treasury, equity and FX trading exposures could see some increase in market-risk RWA under the revised calibration, while the structural FX exemption could provide capital relief for lenders with sizeable overseas operations. Given that market-risk exposures form a relatively smaller part of overall bank RWAs, the impact on system-level capital ratios and lending capacity is likely to remain contained.

Impact: Neutral

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