Reserve Bank of India (Payments Banks – Prudential Norms on Capital Adequacy) Third Amendment Directions, 2026
The Reserve Bank of India amended capital adequacy norms for payments banks, aligning clearing member requirements with global standards and reducing risk weights for certain exposures to 2%.
The Reserve Bank of India (RBI) issued the Third Amendment Directions to update prudential norms for payments banks, specifically addressing legal opinion requirements for clearing member banks under paragraph 52(5)(i) of the 2025 Directions. The amendment aims to harmonize these norms with international standards, ensuring consistency in risk management practices across jurisdictions. The changes reflect the RBI’s ongoing efforts to strengthen the regulatory framework for payments banks, which play a critical role in India’s digital payments ecosystem.
Under the amended directions, payments banks acting as clearing members for Qualified Central Counterparties (QCCPs) must apply a 2% risk weight to their trade exposures for OTC derivatives, exchange-traded derivatives, and Securities Financing Transactions (SFTs). This applies both to the bank’s own exposures and to exposures arising from client transactions where the bank is obligated to reimburse clients in case of a QCCP default. The amendment clarifies the capital treatment for these exposures, reducing the risk weight from previously applicable higher rates.
The RBI exercised its powers under Section 35A of the Banking Regulation Act, 1949, to issue these directions, citing public interest and the necessity to align with international best practices. The amendment directions are effective immediately upon issuance, with no transition period specified. The RBI’s decision follows a review of existing norms, which identified the need for greater clarity and consistency in risk weighting for clearing member banks.
The amendment modifies the Reserve Bank of India (Payments Banks – Prudential Norms on Capital Adequacy) Directions, 2025, by introducing specific risk weight provisions for clearing member banks. The changes ensure that payments banks maintain adequate capital buffers while facilitating their role in clearing and settlement activities. The RBI’s move underscores its commitment to enhancing the stability and resilience of the payments banking sector in India.