RBI Update - Reserve Bank of India (Commercial Banks - Concentration Risk Management) Amendment Directions, 2026

The Reserve Bank of India has issued the Reserve Bank of India (Commercial Banks – Concentration Risk Management) Amendment Directions, 2026 to comprehensively rationalise and align Capital Market Exposure (CME) norms with the revised Credit Facilities framework.

Under the Reserve Bank of India (Commercial Banks – Concentration Risk Management) Directions, 2025, CME norms prescribed ceilings and exposure classifications for capital market-related activities. However, definitions of key terms (such as acquisition finance, bridge finance, CMIs, collateral, etc.) were not fully aligned with the Credit Facilities Directions. Further, the scope of CME, computation methodology, exclusions, and intra-day exposure treatment were spread across multiple provisions, leading to interpretational complexity and regulatory overlap.

The Amendment Directions introduce wide-ranging structural changes, including:

Insertion of aligned definitions (Acquisition Finance, Bridge Finance, CMIs, Collateral, Primary Security, Non-debt Mutual Funds) and deletion of redundant provisions.

Comprehensive substitution of CME scope under new paragraph 95A, explicitly covering investment exposures, credit exposures, acquisition finance, bridge finance, underwriting commitments, IPCs, trade exposures, and financing to non-debt mutual funds.

Introduction of revised CME ceilings under new paragraph 98A: aggregate CME capped at 40% of eligible capital base; direct capital market exposure capped at 20%; acquisition finance capped at 20% within the aggregate limit; and mandatory intra-day sub-limits.

Detailed methodology for CME computation (paragraph 107A), including treatment of direct investments (cost basis), sanctioned limits vs outstanding derivatives, IPCs (with specified percentages for intraday and overnight exposure), and netting conditions.

Provision for offsetting exposures against cash and Government securities (paragraph 107B).

Rationalised exclusions from CME (new paragraph 101A), including exposures to subsidiaries, critical financial infrastructure, certain refinancing components of acquisition finance, and specified underwriting commitments.

Substitution of Annex II with an updated list of critical financial infrastructure entities exempt from CME computation.

The amendments are effective from the date of adoption of the Credit Facilities Amendment Directions, 2026 or April 1, 2026, whichever is earlier.

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