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RBI revises capital charge computation for banks' foreign exchange risk

25 Jun 2026 Evaluate

The Reserve Bank of India (RBI) has revised the computation of capital charge for foreign exchange risk of banks in line with international standards. The RBI stated that banks will compute Net Open Position and maintain capital charge for foreign exchange risk at both the consolidated (group) level and the standalone (solo) level. Further, the RBI said the capital requirement for foreign exchange risk must be met by banks at all times, as measured at the end of each business day. 

The RBI said ‘Upon a review and to ensure greater alignment with international standards and consistent implementation across commercial banks, there is a felt need to amend these instructions.’ The RBI has proposed that the directions come into effect from April 1, 2027. With regard to exclusion, the RBI said, commercial banks will not have to apply foreign exchange risk capital requirement to any position that is deducted from the bank's regulatory capital, including a position that is hedging such a position. 

It said holdings of capital instruments that are deducted from a commercial bank's capital or risk weighted at 1,250 per cent are not required to be included in the forex risk capital requirements. It mentioned ‘A bank shall not apply foreign exchange risk capital requirements to securities which are already matured and remain unpaid, or have been classified as a non-performing asset/investment. Such securities shall attract capital only for credit risk.’


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