New Delhi, Sept. 22 -- The Reserve Bank of India (RBI) has barred banks from reclassifying instruments between the trading book and banking book for regulatory arbitrage or to achieve lower capital requirements under its revised market risk framework.

The directions, issued to align India's market risk rules with the revised Basel III framework, are aimed at simplifying regulations while providing banks with greater flexibility and ease of implementation.

The framework will take effect from April 1, 2027, giving banks time to prepare.

Revised Market Risk Capital Framework

The directions apply to all commercial banks except small finance banks, payments banks and local area banks.

Under the new framework, banks will be required to use...