The RBI revised its Master Direction on Risk Management and Inter-Bank Dealings, focusing on IFSC Banking Units and standalone offices operating in special financial zones.
RBI Revises Inter-Bank Risk Management Guidelines
In A.P. (DIR Series) Circular No. 27 dated October 12, 2026, the Reserve Bank of India updated its Master Direction on Risk Management and Inter-Bank Dealings (originally issued July 5, 2016). The current revision, pursuant to Para 2.3(iii) of Section I of Part A, particularly addresses Authorised Dealer Category-I banks operating International Financial Services Centre (IFSC) Banking Units (IBUs) and Standalone Offices in designated special economic zones.
The update strengthens requirements for credit, market, and liquidity risk management in inter-bank transactions involving IFSCs, which function under a unique regulatory and tax regime to attract global financial business. Enhanced due diligence, counterparty exposure limits, and reporting timelines are now mandated for transactions between domestic banks and IFSC-based entities to prevent regulatory arbitrage and ensure financial stability.
Practitioners in banking and financial law must advise clients on compliance with new transaction monitoring and reporting obligations, particularly for cross-jurisdictional trades. The revision reflects the RBI’s intent to integrate IFSC operations into the broader regulatory framework without compromising on risk containment or financial integrity.
Citations
- Master Direction - Risk Management and Inter-Bank Dealings, July 05, 2016
- A.P. (DIR Series) Circular No. 27/2026
