RBI revises non-option derivative contract limits for commercial banks via Second Amendment Directions, 2026, under Section 35A of the Banking Regulation Act.
Commercial Banks See Revised Derivative Exposure Norms
The Reserve Bank of India issued the Reserve Bank of India (Commercial Banks - Miscellaneous) Second Amendment Directions, 2026 on October 19, 2026, revising risk limits for non-option derivative contracts. The amendment, issued under Section 35A of the Banking Regulation Act, 1949, modifies Section C of Chapter IV of the 2025 Directions, which governs risk exposures in derivative trading.
The revision reflects the RBI’s ongoing efforts to strengthen market discipline and mitigate systemic risks arising from excessive leverage in derivative instruments. Though the exact revised limits are not specified in the public circular, banks are advised to adjust their internal risk assessment models and ensure compliance with the updated prudential framework. This is the second such amendment in 2026, indicating heightened supervisory focus.
Practitioners must guide clients in updating board-mandated risk policies, particularly for forex, interest rate, and commodity derivatives. Enhanced reporting obligations and internal audit validations are expected. Non-adherence may lead to supervisory action under RBI’s enforcement toolkit.
Citations
- Section 35A, Banking Regulation Act, 1949
