The Reserve Bank of India has issued the Reserve Bank of India (Small Finance Banks – Prudential Norms on Capital Adequacy) Second Amendment Directions, 2026 to align capital treatment of Irrevocable Payment Commitments (IPCs) with the revised Capital Market Exposure (CME) framework.
Under the Reserve Bank of India (Small Finance Banks – Prudential Norms on Capital Adequacy) Directions, 2025, IPCs issued by SFBs in favour of clearing corporations were treated as off-balance sheet exposures with a Credit Conversion Factor (CCF), but the linkage between capital computation and the revised CME recognition under the Concentration Risk framework was not explicitly aligned with the updated exposure computation methodology.
Paragraph 74(6) has been substituted to clarify that issuance of an IPC 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%. However, capital is required to be maintained only on the exposure amount reckoned as CME under the Reserve Bank of India (Small Finance Banks – Concentration Risk Management) Directions, 2025, and such exposure shall attract a risk weight of 125%. The amendment becomes effective from the date of adoption of the Credit Facilities Amendment Directions, 2026 or April 1, 2026, whichever is earlier.
Link – https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13302&Mode=0
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