RBI refines operational-risk capital framework for commercial banks, effective April 2027

On 23 October 2026, the Reserve Bank of India issued the Reserve Bank of India (Commercial Banks – Forthcoming Instructions) Second Amendment Directions, 2026, amending Chapter IV of its Forthcoming Instructions Directions, 2025, which sets minimum capital requirements for operational risk. The amendment restates how the components of the Business Indicator (BI), the income and expense items used to measure a bank's exposure to operational risk, map onto specific schedules and line items of a bank's financial statements, for example treating rental income from operating leases as interest income and valuing interest-rate derivative assets at fair value rather than notional value. It also replaces the formula for the Internal Loss Multiplier, under which banks with sufficient historical loss data hold capital partly based on their own past operational losses: the Loss Component is now defined as fifteen times a bank's average annual operational-risk losses, net of recoveries, computed using ten years of loss data, or at least five years for a bank newly brought under the multiplier.

A new explanation sets out how to measure the loss when a bank's own asset is damaged, destroyed, repaired or replaced. RBI issued the Directions under Section 35A of the Banking Regulation Act, 1949, stating it was satisfied they were necessary and expedient in the public interest; they take effect from 1 April 2027.