Brief Overview:
As part of the convergence of banking regulations with Basel III standards, the Reserve Bank of India (“RBI”) has published draft guidelines on minimum capital requirements for market risk (“Draft Guidelines”).
Technical Details:
1) The Draft Guidelines distinguish between the banking book and the trading book. It lists down the instruments that can be included in the trading book (which are subject to market risk capital requirements) and those to be included in the banking book (which are subject to credit risk capital requirements).
2) Banks are required to have clearly defined policies, procedures and documented practices for determining which instruments to include in or to exclude from the trading book for the purposes of calculating their regulatory capital requirements.
3) Final guidelines, after modifications, if any, and after comments from stakeholders will be applicable to all commercial banks, excluding local area banks, payments banks, regional rural banks, small finance banks and all types of co-operative banks. It will be effective from 1st April, 2024.
4) Comments on the Draft Guidelines are to be provided by 15th April, 2023.
For further details, please see:
DRAFTMARKETRISKFRAMEWORK372769A106CE4684B92E90D9F95A1B8E.PDF (rbi.org.in)
For any queries / clarifications, please feel free to ping us and we will be happy to chat:
Ms. Smrithi Nair (smrithi.nair@jclex.com)
Ms. Aashka Shah (aashka.shah@jclex.com)
