RBI issued draft guidelines for minimum capital requirements for market risk

Sakshi Education

The Reserve Bank of India on Friday published draft guidelines for minimum capital requirements for market risk - under Basel III framework
It proposes to impose a slew of curbs on a bank's trading and banking books and steeply increasing the penalties and provisioning ratios.
The regulator said the move is part of converging the Reserve Bank regulations with Basel III standards. The central bank has sought comments from both stakeholders and public by April 15.
The final guidelines, after modifications will be applicable to all commercial banks, excluding local area banks, payments banks, regional rural banks small finance banks and all types of co-operative banks--urban,, state and central co-operative banks and shall come into effect from April 1, 2024.
The new norms draw a boundary between the banking book and the trading book. It list out the instruments that can be included in the trading book, which are subject to market risk capital requirements. It also lists those to be included in the banking book which is subject to credit risk capital requirements.

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