The Reserve Bank of India (RBI) on August 07, 2026, invites public comments on the draft Directions on Credit Valuation Adjustment (CVA) Framework.
The Reserve Bank of India (RBI) has issued draft directions revising the Credit Valuation Adjustment (CVA) framework for commercial banks, aligning it with the updated Basel III standards. CVA captures the risk of potential losses arising from deterioration in counterparty credit quality in derivative transactions. The revised framework replaces the earlier 2011 guidelines and aims to ensure that banks maintain adequate capital to cover CVA risks.
Under the revised framework, banks are permitted to adopt the Basic Approach for CVA (BA-CVA), with flexibility to choose between full or reduced versions. Additionally, banks with minimal exposure to non-centrally cleared derivatives may compute their CVA capital charge as 100% of their Counterparty Credit Risk (CCR) capital charge. The framework also introduces key improvements, including clearer eligibility for CVA hedges, enhanced risk sensitivity through differentiated supervisory risk weights, and separation of systematic and idiosyncratic risk components.
These changes are intended to improve risk measurement accuracy and consistency in capital requirements. RBI has invited comments from stakeholders on the draft directions until August 28, 2026, which can be submitted via the ‘Connect 2 Regulate’ section on its website or directly to the Department of Regulation.
Draft Link - Reserve Bank of India (Commercial Banks – Credit Valuation Adjustment Framework) Directions, 2026.
[Press Release: 2026-2027/836]
