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- It revises Counterparty Credit Risk (CCR) rules to align with Basel III global standards.
- Banks must calculate CCR capital on a consolidated group basis, covering all banking/financial subsidiaries (insurance & non‑financial excluded).
- Add‑on factors updated: interest rate contracts tiered by maturity (0.25% <1 yr, 1.5% >5 yrs, floor 0.50%); commodities face highest (10–15%) due to volatility.
- Clearing members of SEBI‑recognized exchanges must hold explicit CCR capital for client exposures.
- Exposure to Qualifying Central Counterparties (QCCPs) gets a low 2% risk weight, incentivizing safer central clearing.
- If banks prove no liability for client defaults at QCCPs (via legal opinion), no capital charge applies.
- This move strengthens systemic stability, prevents domino defaults, and ensures banks hold capital against “invisible” risks in derivatives.
Question:
Q.1 According to the RBI capital adequacy amendment of 10 March 2026, what add-on factor applies to interest rate derivative contracts with maturity less than one year?a) 0.10%
b) 0.25%
c) 0.50%
d) 1.00%
Answer: b) RBI introduced tiered add-on factors based on maturity. Contracts with less than one-year maturity carry a 0.25% add-on, reflecting relatively lower risk.