The Reserve Bank of India (RBI) has issued directions on minimum capital requirements for market risk under the Basel III framework, aimed at aligning regulatory norms with the revised Basel III standards.

Under the new guidelines, banks will not be permitted to reclassify instruments between the trading book and banking book for regulatory arbitrage with the objective of lowering capital requirements.

The directions are intended to simplify the regulatory framework while providing banks with greater flexibility and ease of adoption.

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