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Key developments: The Reserve Bank of India has issued a draft framework that will, from April 2027, require commercial banks to use a basic approach for credit valuation adjustment (CVA) on derivatives, while giving smaller‑book banks a simplified treatment. Meanwhile, the Delhi High Court has ruled that banks cannot unilaterally reduce interest on court‑ordered fixed deposits, confirming that any rate change must have a legitimate basis.
Why they matter: The RBI’s new CVA rules aim to tighten risk management for banks’ growing on‑chain and synthetic derivative exposures, improving capital adequacy and protecting the banking system from hidden losses. The court’s decision safeguards depositors by ensuring that fixed‑deposit interest rates, especially those ordered by courts, cannot be arbitrarily cut, reinforcing confidence in the banking sector’s fairness.
What to watch next: • Implementation guidelines from the RBI on the CVA methodology and the timeline for smaller banks to adopt the simplified regime.
• Potential regulatory responses from other Indian regulators, such as the Securities and Exchange Board of India, to align with the new derivative framework.
• Any follow‑up litigation or policy adjustments concerning fixed‑deposit interest calculations, especially for large corporate or court‑ordered deposits. [[1]]