RBI Issues Draft Norms On Counterparty Credit Risk For Banks

PR No. 2025-2026/942; Dated: 20.08.2025

1. Introduction of Draft CCR Norms by RBI

The Reserve Bank of India (RBI) has released draft norms on Counterparty Credit Risk (CCR) for banks functioning as clearing members in exchanges. These norms apply specifically to banks involved in equity and commodity derivatives segments, which are inherently subject to higher market volatility. The introduction of CCR norms is part of RBI’s broader objective of strengthening the risk management framework and ensuring financial stability in the derivatives market.

2. Focus on Risk Sensitivity

The proposed norms incorporate higher risk weights for instruments with longer tenor and higher volatility, such as commodities and equities. This reflects the principle that exposures in riskier asset classes and those with longer maturities carry greater uncertainty. By requiring banks to allocate higher capital against such exposures, RBI seeks to safeguard the financial system against potential losses arising from counterparty defaults.

3. Use of Add-On Factors in Exposure Calculations

A significant aspect of the draft is the inclusion of add-on factors in the Current Exposure Method (CEM) for calculating Potential Future Exposure (PFE). These add-on factors are designed to capture additional risks not covered by current market exposure, ensuring a more robust assessment of counterparty credit risk. This step aligns India’s framework more closely with international best practices in derivatives risk management.

4. Stakeholder Participation and Deadline for Comments

To ensure a balanced and practical framework, the RBI has invited comments and feedback from stakeholders, including banks, market participants, and industry experts. The deadline for submitting suggestions or concerns is September 10, 2025. This participatory approach underscores RBI’s commitment to collaborative policymaking, where stakeholder inputs help refine the norms before their final implementation.

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