Author: Nishtha Mehrotra | EQMint
Synopsis:
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- The RBI has mandated SA-CCR for banks with international operations or consolidated group-wide derivative notional outstanding of ₹25,000 crore or more, effective April 1, 2027.
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- The central bank rejected most requests for regulatory relaxations, retaining the 3.5% minimum leverage ratio for Indian branches of global systemically important banks.
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- Other banks can continue using the Current Exposure Method (CEM) or adopt SA-CCR, while affected banks must prepare their systems and reporting processes for the deadline.
What the RBI’s New SA-CCR Directions Mean
The Reserve Bank of India (RBI) issued final directions on October 23, 2026, making the Standardised Approach for Counterparty Credit Risk (SA-CCR) mandatory for specified banks under the leverage ratio framework from April 1, 2027.
The leverage ratio measures a bank’s capital against its total exposure, including derivatives, without relying on risk-weighted calculations. The new directions establish SA-CCR as the required method for banks with an international presence and those with consolidated, group-wide derivative notional outstanding of ₹25,000 crore or more. Other banks can choose between SA-CCR and the existing Current Exposure Method (CEM).
RBI Rejects Most Requests for Relaxations
The RBI accepted a request to update the Centralised Information Management System (CIMS) reporting format but rejected most other proposed changes.
Indian branches of global systemically important banks (G-SIBs) must maintain a minimum leverage ratio of 3.5%, plus any additional buffers required by their home regulators. The RBI also declined to introduce predefined exemptions for central bank balances during exceptional macroeconomic conditions.
The central bank rejected proposals to allow collateral to reduce leverage ratio exposures and to fully align replacement cost and potential future exposure calculations with SA-CCR. It also refused requests for additional transition time, retaining the April 1, 2027 compliance deadline.
Provisions, Reporting and Compliance
The directions clarify that Stage 1 and Stage 2 provisions must be deducted from the exposure measure, subject to the specified transitional capital-impact limit. Off-balance-sheet exposures will follow the credit conversion factors prescribed under the applicable credit risk directions.
Banks must maintain the minimum leverage ratio at all times, although reporting will be based on quarter-end figures. The RBI may consider individual requests for daily or monthly averaging. Additional disclosure adjustments are not required for certain securitised exposures already derecognised from consolidated assets or provisions netted against advances.
Why It Matters
The mandate will affect how banks measure derivative exposures and report leverage ratios. Larger derivative portfolios and banks operating internationally will need to prepare their systems, data and reporting processes ahead of the deadline.
By rejecting requests for broader exemptions and an extended implementation period, the RBI has reinforced its approach to the leverage ratio as a strict backstop to risk-based capital requirements. Smaller, domestically focused banks retain flexibility in choosing their calculation method.
Source: https://flipit.me/JJom
Disclaimer: This article is for information purposes only and is not investment advice.
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