RBI issues Amendment Directions on Counterparty Credit Risk - Add-on factors for computation of Potential Future Exposure

The Reserve Bank of India (RBI) has amended its capital adequacy framework for commercial banks, introducing clearer rules on how lenders must calculate and maintain capital against counterparty credit risk (CCR) exposures. The changes, issued under the RBI (Commercial Banks – Prudential Norms on Capital Adequacy) Third Amendment Directions, 2026, take effect immediately.

RBI announced a significant operational change in the form of revision of a table that specifies add-on factors for market-related off-balance sheet items. The central bank noted that equity contracts now carry add-on factors of 6%, 8%, and 10% for maturities of up to one year, one to five years, and over five years respectively. Precious metals, excluding gold, attract 7%, 7%, and 8% across the aforementioned maturity bands, while other commodities are pegged at 10%, 12%, and 15%.

The RBI also noted that banks acting as clearing members of SEBI-recognised stock exchanges in equity and commodity derivatives segments must compute and maintain a capital charge for CCR. The add-on factors for equities, precious metals, and other commodities apply exclusively in such cases. On consolidated capital computation, banks must now include CCR exposures of all entities consolidated under the capital adequacy framework’s scope of application.

RBI stated that for contracts reset periodically to zero market value, the residual maturity will be counted from the next reset date. Interest rate contracts with residual maturities exceeding one year will be subject to a minimum add-on floor of 0.50%. Regarding Qualifying Central Counterparties (QCCPs), a 2% risk weight applies to a bank’s trade exposure. However, a clearing member bank is exempt from maintaining capital against QCCP trade exposure if it is not obligated to reimburse clients for losses, provided it holds a written legal opinion confirming this protection.

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