Press Release: 2025-2026/2243, Dated 10.03.2026
The Reserve Bank of India (RBI) has issued Amendment Directions revising the Counterparty Credit Risk (CCR) framework relating to the computation of Potential Future Exposure (PFE) under the Current Exposure Method (CEM).
The amendments introduce clarifications regarding capital requirements for banks acting as clearing members and align certain exposure calculation parameters with international regulatory standards.
1. Capital Charge for Clearing Members
The revised directions clarify that banks acting as clearing members in the equity and commodity derivatives segments of SEBI-recognised stock exchanges must maintain an appropriate capital charge for Counterparty Credit Risk (CCR).
This requirement ensures that banks adequately account for credit exposure arising from derivative transactions cleared through stock exchanges.
2. Revision of Add-on Factors for Potential Future Exposure
The amendment revises the add-on factors used for computing Potential Future Exposure (PFE) under the Current Exposure Method. These add-on factors represent the potential increase in exposure arising from market movements in derivative contracts.
Specifically, the RBI has aligned the add-on factors for interest rate contracts and exchange rate contracts with the guidelines issued by the Basel Committee on Banking Supervision (BCBS).
3. Alignment with International Standards
By aligning the PFE add-on factors with BCBS standards, the revised framework seeks to:
- Strengthen the measurement of counterparty credit risk
- Improve consistency with global prudential norms
- Enhance the resilience of banks dealing in derivative markets
4. Objective of the Amendments
The revised directions aim to ensure that banks maintain adequate capital buffers against derivative exposures, particularly where they act as clearing members in exchange-traded derivative markets. The alignment with international standards further promotes sound risk management practices in the banking system.
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