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

The Reserve Bank of India has issued the Reserve Bank of India (Small Finance Banks – Prudential Norms on Capital Adequacy) Seventh Amendment Directions, 2026, effective from 1 April 2027, to align the methodology for computation of Net Open Position (NOP) with international standards and ensure uniform implementation across Small Finance Banks (SFBs). While SFBs are not required to maintain a capital charge for foreign exchange risk, those operating as Authorised Dealer Category-I banks must compute and monitor NOP on a continuous basis at the close of each business day. The amendment introduces a new Annex VII prescribing a comprehensive framework for calculating NOP, including the treatment of spot, forward, derivative, guarantee, future income and expense positions, and gold exposures across both trading and banking books. Certain positions, such as those deducted from regulatory capital and specified non-performing or matured unpaid securities, are excluded from NOP calculations. The Directions also prescribe the shorthand method for measuring overall foreign exchange exposure, require the use of authorised benchmark-based spot rates, and mandate that SFBs follow the RBI’s Master Direction on Risk Management and Inter-Bank Dealings for reporting, applicable limits and NOP-INR requirements.