The Reserve Bank of India (RBI) on February 13, 2026, issued the Reserve Bank of India (Small Finance Banks - Prudential Norms on Capital Adequacy) Second Amendment Directions, 2026, further to amend the Reserve Bank of India (Small Finance Banks – Prudential Norms on Capital Adequacy) Directions, 2025.
The following has been amended, namely:
• The RBI has issued an amendment to paragraph 74(6) under Chapter IV (Risk Weighted Assets) of the 2025 Directions. The amendment clarifies the capital treatment of irrevocable payment commitments (IPCs) issued by Small Finance Banks to clearing corporations of stock exchanges on behalf of their clients.
• Under the revised provision, such IPCs shall be treated as financial guarantees with a Credit Conversion Factor (CCF) of 100%. However, instead of applying capital requirements to the entire guaranteed amount, banks are required to maintain capital only on the portion classified as Capital Market Exposure (CME) in accordance with the RBI (Small Finance Banks – Concentration Risk Management) Directions, 2025. The exposure considered for CME will attract a risk weight of 125% for capital adequacy computation.
• The amendment will come into force from the date a bank implements the RBI (Small Finance Banks – Credit Facilities) Amendment Directions, 2026, or from April 1, 2026, whichever is earlier.
[Notification no. - RBI/2025-26/218 DOR.CRE.REC.409/21-01-002/2025-26]
