RBI Update - Reserve Bank of India (Small Finance Banks - Prudential Norms on Capital Adequacy) Second Amendment Directions, 2026 (Revised)

The Reserve Bank of India has issued the Small Finance Banks – Prudential Norms on Capital Adequacy (Second Amendment) Directions, 2026 (Revised) on March 30, 2026, aligning capital treatment with the revised credit facilities and concentration risk framework. The amendment clarifies that irrevocable payment commitments (IPCs) issued by banks to clearing corporations shall be treated as financial guarantees with a credit conversion factor (CCF) of 100%; however, capital is required to be maintained only on the portion classified as capital market exposure (CME). Further, such exposure will attract a risk weight of 125%, thereby linking capital adequacy requirements directly to CME computation. These revised provisions will become effective from the date of adoption of the Credit Facilities Amendment Directions, 2026, or July 1, 2026, whichever is earlier, superseding the earlier directions dated February 13, 2026. Link - View Circular