The Reserve Bank of India has established a ₹25,000 crore threshold for banks required to adopt the Standardised Approach for Counterparty Credit Risk (SA-CCR), according to reports from The Economic Times. Banks with considerable derivative exposure or international presence will come under this new rule, while lenders below this threshold can choose alternative risk measurement methods. The approach will apply to commercial banks that either have an international presence or report derivative outstanding of ₹25,000 crore or more on a consolidated group-wide basis as of the reporting date. Banks above the threshold will have to shift to the new SA-CCR method from April 2027, while smaller banks can continue with the existing approach or switch to the new framework.
Banks that do not meet the criteria will have the option of using either the Current Exposure Method (CEM) or the Standardised Approach for Counterparty Credit Risk (SA-CCR), as reported by The Economic Times. The central bank had issued draft Amendment Directions on SA-CCR on June 10 and invited comments from stakeholders. The threshold was introduced following feedback from banks, who suggested a quantitative benchmark could be used to identify lenders with relatively negligible derivative exposure. The RBI rejected requests to defer implementation by a year to April 2028, saying the April 2027 date was aligned with the mandate for Basel III compliance.
The amendments modify the Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Directions, 2025, which lay down the methodology banks must use to determine minimum capital requirements for counterparty credit risk, according to The Economic Times. The framework covers several categories of transactions including over-the-counter derivatives, exchange-traded derivatives, securities financing transactions and long-settlement transactions in the banking book. The final Commercial Banks – Forthcoming Instructions Amendment Directions, 2026 replace the Current Exposure Method (CEM) with the Standardised Approach for Counterparty Credit Risk (SA-CCR) for applicable banks. The SA-CCR framework provides a standardised methodology for calculating exposure arising from derivatives for regulatory capital purposes, with the same methodology now being used for other regulatory purposes including the Large Exposures Framework, CRILC reporting and intra-group exposure limits.
Counterparty credit risk refers to the possibility that a party to a financial transaction could fail to meet its obligations before the transaction is settled, as reported by The Economic Times. The RBI's rules cover several categories of transactions that can create such exposure, making the framework particularly relevant for banks with sizeable exposure to derivatives and other financial contracts. The changes are aimed at bringing the capital framework for counterparty risk closer to international standards while giving banks with smaller derivative books flexibility in choosing the calculation method. The central bank has also issued the Reserve Bank of India (Commercial Banks–Credit Valuation Adjustment Framework) Directions, 2026, as part of its broader effort to strengthen the regulatory framework governing banks' capital requirements and their exposure to counterparty-related risks.
