Reserve Bank of India (Commercial Banks - Capital Charge for Credit Risk – Standardised Approach) Directions, 2026 (Effective from April 1, 2027)

1. From April 2027

These instructions come into force from April 01, 2027.

2. Never below the rating

A bank's own check may never produce a weight below the rating based one.

3. States differ when guaranteeing

Direct state government loans weigh zero, but state guaranteed claims weigh 20 per cent.

BankPulse example. A bank holds a loan that a state government has guaranteed. That claim must carry a risk weight of 20 per cent. So a guaranteed claim is not treated the same as a direct one.

4. New schemes, faster claims

Schemes launched on or after September 7, 2022 face extra claim speed conditions.

5. Thirty days to settle

Those newer schemes must settle eligible guaranteed claims within thirty days of filing.

6. Sixty days to file

Such schemes must also allow claim filing within sixty days of default.

7. Export insurer at 20

Claims on the export credit guarantee corporation weigh 20 per cent.

8. Short bank loans favoured

Bank exposures of three months or less, and six months for cross border goods, get the lighter short term weights.

9. Big unrated means 150

An unrated company or finance company owing the banking system over ₹500 crore weighs 150 per cent.

10. Core investment companies fixed

A core investment company always weighs 100 per cent.

11. High quality projects rewarded

An operational infrastructure project meeting strict tests weighs only 80 per cent.

12. Above a tenth, 1250

A stake above a tenth of the issuing company's share capital weighs 1250 per cent.

13. Retail at 75

Qualifying retail loans weigh 75 per cent.

14. Small business defined

Small business here means turnover of ₹500 crore or less, counted at group level.

15. Four retail tests

Retail needs a person or small business, a qualifying product, at most ₹10 crore, and real spread.

16. The spread test

No single retail borrower may exceed 0.2 per cent of the whole retail pool.

17. Costlier personal loans

Personal loans and credit card dues outside the retail pool weigh 125 per cent.

18. Microfinance at 100

Microfinance loans of a consumer credit nature outside retail weigh 100 per cent.

19. Small enterprises at 85

Unrated small business loans outside the retail pool weigh 85 per cent.

20. Revalue every three years

Collateral value must be checked at least once every three years.

21. Value set at the start

The property value stays at origination level; upward revision waits five years.

22. Third home costs more

From the third home loan onward the bands rise to 30 to 60 per cent.

23. Five points above 3 crore

A home loan of ₹3 crore or more adds five percentage points of weight.

24. Bad loans by provision

A bad loan's unsecured part weighs 150 when provisions are under 20 per cent.

25. Provisions halve the weight

With provisions at half the amount, the weight drops to 50 per cent.

26. Bad home loans at 100

A qualifying home loan gone bad weighs 100 per cent net of provisions.

27. Share market lending at 125

Capital market exposures weigh 125 per cent or the counterparty weight, whichever is higher.

28. Security receipts at 150

Investments in security receipts weigh 150 per cent.

29. Unhedged currency costs more

Heavy unhedged foreign currency exposure adds 25 per cent to the borrower's risk weight.

30. Staff loans favoured

Staff loans covered by retirement benefits or a mortgaged house weigh 20 per cent.

31. Everything else at 100

Any asset without its own rule weighs a flat 100 per cent.

32. Big undrawn limits count

Undrawn working capital of borrowers with ₹150 crore or more of limits now converts too.

33. No cherry picking

A bank must use its chosen agencies consistently and may never pick ratings case by case.

34. Fresh ratings only

A rating counts only if public, in force, and reviewed within the last 15 months.

35. Unnamed bank, no rating

A loan rating that does not name the bank and facility publicly cannot be used; the loan counts as unrated.

36. Group ratings do not travel

One group company's rating can never weight another company in the same group.

37. Only solicited ratings

Ratings the borrower never asked for and accepted do not count, except for foreign governments.

38. Silent borrowers cost more

An issuer not cooperating rating floors the weight at 100, and at 150 beyond six months.

39. Cover fades at three months

Cover also stops counting once three months or less remain.

40. Currency mismatch haircut

Collateral in a different currency loses eight per cent for the mismatch.

41. Old capital rules replaced

On April 01, 2027 the matching parts of the 2025 capital adequacy directions stand repealed.

1. Know your borrower yearly

Banks must understand each borrower's risk at the start and at least once a year after.

2. Collateral cuts exposure

Banks must use the comprehensive approach: haircut adjusted collateral reduces the exposure before weighting.

1. Who is covered

The rules bind the banking book of commercial banks; small finance, payments and local area banks are excluded.

2. Weight times exposure

Risk weighted assets are the risk weight multiplied by the exposure, net of specific provisions.

3. Government carries no weight

Loans to and guaranteed by the Central Government carry a zero per cent risk weight.

4. Guarantee scheme cover free

The government guaranteed part of small business scheme loans weighs zero, under strict conditions.

5. Rupee funded, rupee lent

The zero weights hold only for exposures both written and funded in rupees.

6. Foreign governments by rating

Foreign government exposures take their weight from their international credit rating.

7. Public bodies like companies

Public sector entities and local government bodies weigh the same as corporate borrowers.

8. World lenders at zero

The World Bank group, IMF, BIS and thirteen named development banks weigh zero.

9. Banks by rating

Rated bank exposures take base weights from their external rating.

10. Company loans by rating

Corporate exposures take base weights from their rating, adjusted by published default rates.

11. Project loans by phase

Unrated object finance weighs 100; project finance weighs 130 before operations and 100 after.

12. Cash flow first

The 100 or 80 weight needs positive net cash flow and repayment already started; otherwise 130 stays.

13. Equity weighs heavy

Equity and subordinated debt carry fixed heavy weights, the speculative unlisted kind the heaviest of all.

14. Homes by loan to value

A first or second home loan takes light weights that rise band by band with loan to value.

15. Slow builders pay

Construction missing its start or finish deadline pushes the weight to 150 till cured.

16. A quarter from the builder

The residential tag needs the builder's own upfront quarter of project cost, homebuyer money excluded.

17. Builder loans, two rates

Residential project construction loans weigh 100; other commercial property development weighs 150.

18. Rent fed loans weigh more

Property loans repaid mainly from rent or sale carry higher bands than business fed ones.

19. Look through the fund

Fund investments are weighted by looking through to the fund's own holdings where disclosures allow.

20. Third party costs a fifth

Using a third party's look through calculation costs 1.2 times the weight.

21. No data, full deduction

Where neither fund approach works, the investment is deducted from core capital in full.

22. Foreign currency home loans

Retail loans in a currency the borrower does not earn get 1.5 times the weight, capped at 150.

23. Cash and gold at zero

Cash held or in transit and backed gold bullion weigh zero.

24. Promises become exposures

Off balance sheet items convert to credit amounts through conversion factors, then take the counterparty weight.

25. Guarantees count in full

Financial guarantees and similar direct credit substitutes convert in full.

26. Performance bonds at half

Performance bonds, bid bonds and warranties convert at half.

27. Trade letters at a fifth

Short self liquidating trade letters of credit convert at a fifth.

28. Cancellable lines now cost

Freely cancellable credit lines, once costless, now convert at a small factor that later doubles.

29. Seven agencies at home

Banks may use ratings from seven named domestic agencies, reviewed periodically by RBI.

30. Default rates adjust weights

Published default rates can push a rating category one weight bucket higher.

31. Two ratings, take higher

With two ratings the higher adjusted weight applies; with three or more, the higher of the best two.

32. Short cover ignored

Protection with under a year's original life is not recognised at all.

33. What counts as collateral

Eligible collateral spans cash, gold, government paper, small savings certificates, surrender value policies and rated debt.

34. No haircut on own deposits

Own deposits and small savings certificates take no haircut at all.

35. Gold shaved by a fifth

Gold collateral loses a fifth of its value as haircut.

36. Guarantees shift the weight

A direct, irrevocable, unconditional guarantee lets the guarantor's lower weight replace the borrower's.

37. Bad loans lose the shield

Once a guaranteed loan turns non performing, the guarantee stops counting as protection.