RBI's draft norms for standardised approach to credit risk coming soon

Reserve Bank of India

In an effort to make the banking system more risk-sensitive, the central bank will issue draft guidelines on the implementation of the revised Basel framework on Standardised Approach for Credit Risk for Scheduled Commercial Banks, RBI Governor Sanjay Malhotra said on October 1.

These will be excluding small finance banks, payments banks and regional rural banks, he added.

“As a part of the broader objective of improving the resilience of the banking sector and aligning the regulatory framework with the best international practices, it is proposed to issue the draft guidelines on implementation of the revised Basel framework on Standardised Approach for Credit Risk for Scheduled Commercial Banks,” RBI Governor said while announcing the monetary policy.

What Will the Framework Achieve?

The revised framework aims to improve robustness, granularity and risk sensitivity when it comes to the standardized approach for calculating the capital cost for taking a credit risk. The draft guidelines shall be issued shortly, RBI Governor has said.

Basel III Norms

The governor added that it is considering making the revised Basel III capital adequacy norms effective for commercial banks (excluding SFBs, PBs and RRBs) from April 1, 2027.

RBI MPC Outcome

The RBI’s Monetary Policy Committee (MPC) decided to keep the benchmark repo rate unchanged at 5.5 percent on October 1, with the stance too unchanged to 'Neutral'. The MPC said ir considers it prudent to wait for impact of policy actions to play our before charting the next policy action.

As a result, the standing deposit facility (SDF) rate remains unchanged at 5.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 5.75 per cent.

The decision was in line with Moneycontrol’s poll of economists and bankers who predicted the RBI’s Monetary Policy Committee (MPC) will hold rates due to comfort from the higher growth in the first quarter while taking time to assess the data on the Goods and Services Tax (GST) reforms.