The Reserve Bank of India has issued the Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Second Amendment Directions, 2026 to align capital treatment of irrevocable payment commitments with revised credit facility norms.
Under the Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Directions, 2025, issuance of irrevocable payment commitments (IPCs) by banks to clearing corporations of stock exchanges on behalf of clients was treated as an off-balance sheet exposure with applicable Credit Conversion Factor (CCF) and corresponding risk weight. However, there was lack of explicit clarity that capital should be maintained specifically on the exposure reckoned as Capital Market Exposure (CME), resulting in possible variations in capital computation practices.
Paragraph 84(6) under Chapter IV (Risk Weighted Assets) has been modified to clarify that:
Issue of irrevocable payment commitment by a bank to clearing corporations of stock exchanges on behalf of its client shall be treated as a financial guarantee with a CCF of 100%.
Capital shall be maintained only on the exposure reckoned as Capital Market Exposure (CME) in terms of the Reserve Bank of India (Commercial Banks – Concentration Risk Management) Directions, 2025.
The applicable risk weight shall be 125% on the amount considered as CME.
The amendment shall be effective from the date a bank adopts the Credit Facilities Amendment Directions, 2026 or April 1, 2026, whichever is earlier.
Link – https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13295&Mode=0
