Reserve Bank of India (RBI) has issued Draft Guidelines on Minimum Capital Requirements for Market Risk. The notification was issued on 17th February, 2023.
The Draft Guidelines comprise of 3 chapters. These are:
- Chapter 1: Boundary between the banking book and the trading book
- Chapter 2: Definitions and application of market risk and
- Chapter 3: Calculating risk-weighted assets for market risk
The new norms clearly draw a boundary between the banking book and the trading book and list out the instruments that can be included in the trading book, which are subject to market risk capital requirements; and those to be included in the banking book which is subject to credit risk capital requirements.