RBI Update - Reserve Bank of India (Urban Co-operative Banks - Prudential Norms on Capital Adequacy) Third Amendment Directions, 2026

The Reserve Bank of India has issued the Reserve Bank of India (Urban Co-operative Banks – Prudential Norms on Capital Adequacy) Third Amendment Directions, 2026, effective from 1 April 2027, to strengthen and standardise the methodology for computation of Net Open Position (NOP) and capital charge on foreign exchange and gold exposures across Urban Co-operative Banks (UCBs). The amended framework requires UCBs to maintain capital for foreign exchange risk on a continuous basis at the close of each business day and prescribes detailed guidelines for calculating NOP by including all foreign currency and gold positions held in both the banking and trading books. Certain positions, including those deducted from regulatory capital and specified non-performing or matured unpaid securities, are excluded from NOP calculations. The Directions provide comprehensive guidance on the treatment of spot, forward, derivative, guarantee, future income and expense positions, as well as gold exposures, and require UCBs to determine overall NOP using the prescribed shorthand method based on aggregate net long or short currency positions and gold positions. The capital requirement for foreign exchange and gold positions shall continue to be 9% of the overall NOP, in addition to capital requirements for credit, interest rate and other applicable risks. Further, the amendment clarifies that only Authorised Dealer (AD) UCBs are required to apply risk weights on foreign exchange NOP, while other UCBs need to consider only gold-related NOP for market risk purposes, and all eligible UCBs must comply with the RBI’s Master Direction on Risk Management and Inter-Bank Dealings for reporting and limit monitoring requirements.