MANU/RMIC/0024/2024
Ministry : Reserve Bank of India
Department/Board : Department of Regulation
Circular No. : DOR.MRG.REC.80/00-00-003/2022-2023
RBI/2023-2024/128
Date : 28.02.2024
Notification/ Circulars Referred : Master Circular - Basel III Capital Regulations dated May 12, 2023 MANU/RMIC/0060/2023; Master Direction - Prudential Norms on Capital Adequacy for Local Area Banks (Directions), 2021 dated October 26, 2021 MANU/RMIC/0136/2021; 'Draft Guidelines on Minimum Capital Requirements for Market Risk - under Basel III' MANU/RPRL/0104/2023
Subject: Banking
Citing Reference:
Master Circular - Basel III Capital Regulations dated May 12, 2023 MANU/RMIC/0060/2023 Referred
Master Direction - Prudential Norms on Capital Adequacy for Local Area Banks (Directions), 2021 dated October 26, 2021 MANU/RMIC/0136/2021 Referred
?Draft Guidelines on Minimum Capital Requirements for Market Risk - under Basel III? MANU/RPRL/0104/2023 Referred
All Commercial Banks
(excluding Regional Rural Banks)
Dear Sir / Madam,
Capital Adequacy Guidelines
1. Please refer to Master Circular - Basel III Capital Regulations dated May 12, 2023, and Master Direction - Prudential Norms on Capital Adequacy for Local Area Banks (Directions), 2021 dated October 26, 2021 (hereinafter together referred to as 'capital adequacy guidelines').
2. As you are aware, the Master Direction - Classification, Valuation and
Operation of Investment Portfolio of Commercial Banks (Directions), 2023 dated
September 12, 2023 (hereinafter referred as 'MD on Investment') inter alia
provides a clearly identifiable trading book under 'Held for Trading (HFT)'
accounting sub-classification and introduces AFS-reserve which would be part of
regulatory capital. In view of the changes cited above, it has been decided to
amend the capital adequacy guidelines in alignment with the MD on Investment.
3. Accordingly, the provisions of Master Circular - Basel III Capital Regulations have been modified as provided in Annex 1.
4. It may be noted that 'Draft Guidelines on Minimum Capital Requirements for Market Risk - under Basel III' providing inter alia 'Definition of trading book' and 'Market Risk capital Requirements - Simplified Standardised Approach' were released on February 17, 2023 for public comments. While the revised definition of trading book for the purpose of capital adequacy will be as provided in Annex I of MD on Investment, the final guidelines on 'Market Risk Capital Requirements - Simplified Standardised Approach' will be implemented at a later date and detailed guidelines will be issued separately.
5. Considering the transition to 'Market Risk Capital Requirements -
Simplified Standardised Approach', the extant market risk capital requirements
have also been recalibrated by introducing intermediate scalers. Banks should
keep this in view while reviewing their strategies and capital planning
measures.
6. Further, the provisions of Master Direction - Prudential Norms on Capital Adequacy for Local Area Banks (Directions), 2021 have been modified as provided in Annex 2.
Applicability
7. These instructions shall be applicable from April 1, 2024 to all Commercial Banks (excluding Regional Rural Banks).
Yours faithfully,
(Usha Janakiraman)
Chief General Manager