RBI requires SA-CCR for banks with derivatives outstanding of ₹25,000 crore+

Under the new guidelines, banks with an international presence or derivative outstanding of Rs 25,000 crore and above on a consolidated group-wide basis must use SA-CCR to calculate derivative exposures. Other banks have the discretion to use either SA-CCR or continue with the Current Exposure Method (CEM). The central bank stated that the final directions have been modified based on feedback received on the draft guidelines, allowing banks flexibility in choosing the method best suited to their operations if they do not meet the thresholds for mandatory SA-CCR use.

The RBI also addressed requests from stakeholders on other aspects of the leverage ratio framework. It accepted the suggestion to consider changes to the reporting format on the Centralised Information Management System (CIMS) platform to align with the updated guidelines. However, the central bank declined to ease the leverage ratio requirements for Indian branches of global systemically important banks (G-SIBs). These branches will continue to be required to maintain a minimum leverage ratio of 3.5 percent, along with any applicable additional buffers as prescribed by the home regulator.

Stakeholders had requested that the RBI set a cap on this requirement linked to the home jurisdiction’s standards, bring the ratio in line with the Basel minimum of 3 percent, or adjust it according to the activities and systemic importance of the Indian branch. The RBI maintained its stance, stating that the requirements remain consistent with the additional Common Equity Tier 1 (CET1) capital stipulations for G-SIBs under the risk-based capital framework.

The RBI also chose not to set quantitative parameters or pre-defined triggers for granting temporary exemptions for balances maintained with it from the leverage ratio exposure measure during exceptional macroeconomic situations. It explained that the Basel framework provides discretion rather than specific parameters and clarified that guidance, including minimum leverage ratio calibration, would be issued if such exemptions are ever granted.

Additionally, the RBI rejected requests to align the calculation of replacement cost and potential future exposure under the leverage ratio framework completely with the SA-CCR methodology, citing that collateral received from counterparties cannot reduce the leverage ratio exposure measure due to the leverage ratio’s non-risk-based nature.

The directions clarify that Stage 1 and Stage 2 provisions are to be entirely deducted from the exposure measure, limited only to the extent of the transitional capital impact. For off-balance-sheet exposures, the credit conversion factors prescribed in Table 19 of paragraph 22 of credit risk directions will be applied, with no transition period for the factor at serial number 9 in leverage ratio calculations.

Regarding disclosures, banks are not required to make further adjustments for securitised exposures already deducted from consolidated assets through accounting derecognition, nor for provisions netted off against advances. The framework further stipulates that banks must comply with the minimum leverage ratio at all times, with quarter-end reporting based on figures at the end of the quarter, though individual requests for daily or monthly averaging may be considered.

The RBI has also denied pleas for additional transition time, reaffirming April 1, 2027, as the date for mandatory compliance, in line with the Basel III implementation timeline.