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RBI Finalises CVA Rules Requiring Stricter Capital for Large Derivative Books
M
Moneycontrol•07-10-2026, 17:52
RBI Finalises CVA Rules Requiring Stricter Capital for Large Derivative Books
- •The Reserve Bank of India has finalised its Credit Valuation Adjustment framework, requiring banks to hold capital against potential derivative losses from counterparty credit deterioration.
- •The new rules take effect on April 1, 2027, applying to commercial banks while excluding small finance, payments, and local area banks.
- •Banks with non-centrally cleared derivatives up to Rs 10 lakh crore can opt for a simpler alternative treatment without recognizing hedges.
- •Larger institutions must adopt the Basic Approach for CVA, choosing between full and reduced versions depending on their active hedging strategies.
- •The framework includes key clarifications on cleared trades, novated exposures, clearing member obligations, and rating thresholds.
Key Questions Answered
The new CVA rules finalized by the Reserve Bank of India will take effect from April 1, 2027.
The rules apply to commercial banks, but specifically exclude small finance banks, payments banks, and local area banks.
Banks with aggregate non-centrally cleared derivatives of up to Rs 10 lakh crore can opt for a simpler alternative treatment.
