The Reserve Bank of India (RBI) kept up its oversight of the banking sector in September 2026 through prudential reforms and targeted action on new risks. These RBI regulatory updates cover cyber fraud, money mule accounts, market risk capital, valuation rules, KYC norms and the streamlining of regulatory requirements.

Tackling money mule accounts and cyber-enabled financial fraud

The RBI released the draft Know Your Customer Amendment Directions, 2026 (Draft Amendment). The draft RBI KYC amendment directions 2026 set out a detailed standard operating procedure (SOP) for finding, tracking and blocking suspected money mule accounts. It applies to all commercial banks, including small finance banks, payments banks, regional rural banks and local area banks, and to all urban co-operative banks (UCBs). It is proposed to take effect from 1 April 2027.

The proposed framework adds stronger transaction monitoring, temporary debit-hold steps, better reporting and closer coordination with law enforcement. Banks may also need centralised management information systems (MIS), stronger suspicious transaction report (STR) accountability, nodal officers and enough training for customer-facing and front-line staff.

The draft follows the Honourable Supreme Court's directions in its suo moto proceedings on 'digital arrest' scams. Those directions ask the RBI to set out an SOP for temporary debit holds on amounts or accounts linked to money mule activity and cyber-enabled fraud. The proposed money mule account regulations in India aim to give banks a clear response playbook.

What banks should consider

Banks will need to review readiness across governance, anti-money laundering (AML), fraud risk management, operations, technology, customer service and legal teams. Key points include detection design, case handling, customer impact management, data and technology readiness, and controls after an account is flagged. This is a core banking compliance and risk management task.

Immediate next steps include:

1.

Evaluating technology readiness and vendor capabilities

2.

Testing monitoring rules against the INR 1,000 trigger using historical data

3.

Developing internal policy and SOP manuals

4.

Setting up governance for customer complaints and grievances

5.

Appointing nodal officers

6.

Strengthening training capabilities

New minimum capital requirements for market risk

The RBI issued the Reserve Bank of India (Commercial Banks - Minimum Capital Requirements for Market Risk) Directions, 2026, effective from 1 April 2027. These RBI market risk capital requirements apply to all commercial banks and banking companies, other than small finance banks, payments banks and local area banks, as well as corresponding new banks and State Bank of India.

The Directions move market risk capital rules out of the composite Capital Adequacy Directions, 2025, into a standalone framework. They also align the rules with the revised Basel III framework.

Revised scaling factors

The final scalars have increased from the intermediate scalars in force since 1 April 2024:
1.2 to 1.30

Interest rate risk

2.0 to 3.50

Equity risk

1.1 to 1.20

Foreign exchange risk

The framework also adds rules on banking and trading book boundaries and internal risk transfers, structural foreign exchange exclusions, revised equity capital charges, simpler interest rate specific-risk treatment, duration-based treatment of debt mutual funds and exchange traded funds (ETFs), and new Pillar 3 disclosure formats.

Impact on banks

The total capital impact will vary based on a bank's trading book mix. From the scalar change alone, interest rate and foreign exchange capital rise by about 8% and 9%, respectively. Equity capital rises by about 1.55 times, from 40.5% to 63% of a long position.

Banks will also need to review market risk engines, data needs, governance and records, treasury and portfolio strategy, and regulatory reports. A parallel capital run before the 1 April 2027 effective date is a good way to measure the real impact.

Other key regulatory developments

The RBI amended the investment portfolio directions for many bank categories to add a specific valuation framework for units of Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs).

Quoted units will be valued under the current rules for quoted securities. Unquoted units will be valued using the latest Net Asset Value (NAV) disclosed by the InvIT or REIT. Where NAV is not computed and disclosed under the relevant Securities and Exchange Board of India (SEBI) rules, or where the units are classed as infrequently traded, they will be valued at INR 1 for RBI purposes.

The RBI reviewed circulars issued under the Foreign Exchange Management Act, 1999 (FEMA) since 1 June 2000. It withdrew several circulars because they were obsolete after later changes, redundant, overlapping or already replaced by newer directions.

The review is meant to streamline FEMA rules, cut regulatory clutter and make compliance easier for regulated entities and authorised persons. That fits the RBI banking regulations 2026 theme of simpler but stronger rules.

The RBI amended the definition of 'Certified Copy' across several KYC directions to extend the alternate document certification facility to foreign portfolio investors (FPIs). The facility is already open to non-resident Indians (NRIs) and persons of Indian origin (PIOs).

Banks may also accept original certified copies of KYC documents for FPIs where those documents are certified by specified authorities, including:

  • Authorised officials of overseas branches of Scheduled Commercial Banks registered in India.
  • Branches of overseas banks having relationships with Indian banks.
  • A Notary Public abroad
  • A Court Magistrate
  • A Judge
  • An Indian Embassy or Consulate General in the country where the customer lives.

The Foreign Exchange Management (Export and Import of Goods and Services) (Amendment) Regulations, 2026 become effective from 1 October 2026. The amendments cut the prescribed period for the realisation and return of export proceeds from 15 months to 9 months. For exports invoiced and/or settled in INR, the extended period has been cut from 18 months to 12 months.

The RBI's enforcement actions during the month show a continued oversight focus on data accuracy, timely reporting to credit bureaus, customer protection duties and compliance with prudential exposure norms.

Key regulatory themes included:

  • Credit information reporting
  • Customer data and KYC governance
  • Customer protection, compensation and fair treatment failures
  • Exposure norms
RBI Regulatory Banking Insights
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RBI Regulatory Banking Insights

November2026

FAQs

Both the draft KYC amendment on suspected money mule accounts and the standalone market risk capital directions is proposed to take effect from 1 April 2027. Banks should use the time before that date to test systems, refine internal SOPs, assess capital impact and strengthen governance.

The focus reflects higher risks from cyber-enabled financial fraud, including scams that use accounts to receive or move illicit funds. The draft framework also follows the Honourable Supreme Court's directions in its suo moto proceedings on 'digital arrest' scams, which asked for an SOP on temporary debit holds linked to suspected money mule activity and cyber-enabled fraud.

Banks may need to improve transaction monitoring, use temporary debit-hold processes, strengthen STR accountability, keep centralised MIS, appoint nodal officers and work more closely with law enforcement agencies. They will also need to train customer-facing and front-line staff and prepare steps for handling customer complaints and grievances.

The revised scalars raise capital requirements for interest rate, equity and foreign exchange risks. Based only on the scalar changes, interest rate risk capital rises by about 8%, foreign exchange risk capital by about 9%, and equity capital rises by about 1.55 times, from 40.5% to 63% of a long position. The actual impact will depend on each bank's trading book mix.

The updates show a wider push for clearer valuation rules, simpler and updated regulatory requirements, stronger KYC processes, faster export proceeds return and tighter enforcement of reporting, customer protection and prudential norms. Overall, the RBI is focusing on resilience, consistency, compliance discipline and readiness for new risks.

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