RBI revises Net Open Position computation and forex risk capital charge effective 1 April 2027
Banks and Regulated Entities must compute NOP and forex risk capital charge under the revised instructions from 1 April 2027
Change
On 24 June 2026, the Reserve Bank of India (RBI) issued Amendment Directions revising the computation of Net Open Position (NOP) and the forex risk capital charge across all bank classes and other Regulated Entities, aligning with Basel standards, effective 1 April 2027.
Why it matters
The Directions remove the separate onshore/offshore NOP calculation and include accumulated surplus of overseas operations in NOP, changing the set of exposures that determine forex capital requirements. The forex risk capital charge must be maintained against the actual NOP, the Shorthand method must be aligned with Basel guidelines with open positions in gold treated separately, and certain structural forex positions may be exempted from NOP only where they qualify.
Implications
- — Banks' treasury and ALM teams must recompute NOP on an aggregated basis — removing the separate onshore/offshore calculation and including accumulated surplus of overseas operations — from 1 April 2027, or produce NOP measures that misstate forex capital requirements under the Amendment Directions.
- — Capital-adequacy and regulatory-reporting teams at all Regulated Entities must maintain the forex risk capital charge against the actual NOP from 1 April 2027, replacing the prior basis, or fail to meet the RBI's prudential directions.
- — Market-risk and risk-modelling teams at all Regulated Entities must realign the Shorthand NOP method with Basel guidelines, treating open positions in gold separately, before 1 April 2027, or produce non-conforming NOP computation outputs.
Who is affected
- — Banks' treasury and ALM teams
- — Capital-adequacy and regulatory-reporting teams at Regulated Entities
- — Market-risk and risk-modelling teams at Regulated Entities
What to watch
- — 1 April 2027: the revised NOP computation and forex risk capital charge take effect.