The Reserve Bank of India (RBI) will introduce a revised Standardised Approach for credit-risk capital starting April 2027, which will connect regulatory risk weights to borrower ratings and the historical default performance of rating agencies, FX Street reported.
According to Societe Generale economist Kunal Kundu, the new framework aims to better align capital requirements with actual credit risk by incorporating both borrower creditworthiness and agencies’ past default data. This marks a significant shift in how banks will assess and allocate capital against credit exposures in India.
For Japanese investors and financial institutions with exposure to Indian markets, this regulatory change could influence risk assessment practices and capital allocation strategies in the region’s banking sector.