Small Finance Banks Capital Adequacy Directions Revised
Summary
The Reserve Bank of India issued amendment directions (RBI/2025-26/261) revising capital adequacy requirements for small finance banks. The amendment modifies paragraph 74(6) regarding irrevocable payment commitments to clearing corporations, applying a 100% credit conversion factor but requiring capital only on the capital market exposure portion at 125% risk weight. The revised directions take effect upon implementation or July 1, 2026, superseding the February 2026 version.
What changed
The RBI has revised Chapter IV - Risk Weighted Assets provisions for small finance banks, specifically paragraph 74(6). The amendment addresses how banks must treat irrevocable payment commitments issued to clearing corporations of stock exchanges on behalf of clients. Under the revised rules, such commitments carry a 100% Credit Conversion Factor (CCF) as financial guarantees, but capital is maintained only on the exposure amount classified as capital market exposure (CME) under the concentration risk management directions, with a 125% risk weight applied.
Small finance banks should review their capital adequacy frameworks and update their risk weight calculations to align with the revised CME treatment. Banks must implement these changes either from the date they choose to adopt the related Credit Facilities Amendment Directions or by July 1, 2026, whichever comes earlier. The amended directions supersede the previous version dated February 13, 2026, requiring banks to ensure their compliance documentation reflects the current version.
What to do next
- Update capital adequacy calculations to reflect 125% risk weight on CME portions of irrevocable payment commitments
- Replace February 2026 version with the March 2026 revised directions in compliance documentation
- Ensure implementation is complete by July 1, 2026 or earlier if adopting the related Credit Facilities amendments
Archived snapshot
Mar 31, 2026GovPing captured this document from the original source. If the source has since changed or been removed, this is the text as it existed at that time.
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_________________________ RESERVE BANK OF INDIA ______________________ www.rbi.org.in
RBI/2025-26/261 DOR.CRE.REC.453/21-01-002/2025-26 March 30, 2026
Reserve Bank of India (Small Finance Banks - Prudential Norms on Capital Adequacy) Second Amendment Directions, 2026 (Revised)
Please refer to the Reserve Bank of India (Small Finance Banks – Prudential Norms on Capital Adequacy) Directions, 2025 (hereinafter referred to as ‘the Directions’).
On a review, consequent to the issuance of the Reserve Bank of India (Small
Finance Banks – Credit Facilities) Amendment Directions, 2026 (Revised) dated March 30, 2026 and in exercise of the powers conferred by the section 21 and 35A of the Banking Regulation Act, 1949 and all other laws enabling the Reserve Bank of India (hereinafter called the Reserve Bank) in this regard, the Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Amendment Directions (Revised) hereinafter specified.The Amendment Directions (Revised) modify paragraph 74(6) in ‘Chapter IV - Risk
weighted assets (RWAs)’ of the Directions as under: “Issue of irrevocable payment commitment by a bank to clearing corporations of stock exchanges on behalf of its client is a financial guarantee with a CCF of 100 per cent. However, capital shall be maintained only on the exposure reckoned as capital market exposure (CME) in terms of the Reserve Bank of India (Small Finance Banks - Concentration Risk Management) Directions,Thus, capital is to be maintained on the amount taken for CME and the
risk weight shall be 125 per cent thereon.”The above revised amendment shall come into force from the date a bank decides
to implement the provisions of the Reserve Bank of India (Small Finance Banks – Credit Facilities) Amendment Directions, 2026 - (Revised) dated March 30, 2026 or
, , , 12/ 13 , , , - 400001 / Tel No: 22661602, 22601000 / Fax No: 022-2270 5691 Department of Regulation, Central Office, Central Office Building, 12th/ 13th Floor, Shahid Bhagat Singh Marg, Fort, Mumbai – 400001
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from July 1, 2026, whichever is earlier, and shall supersede the Reserve Bank of India (Small Finance Banks - Prudential Norms on Capital Adequacy) Second Amendment Directions, 2026 dated February 13, 2026. (Vaibhav Chaturvedi) Chief General Manager
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