Capital Adequacy Standards and Risk Management Guidelines
The Reserve Bank of India has issued guidelines for Standalone Primary Dealers (SPDs) to ensure capital adequacy and effective risk management.
Capital Funds: Consist of Tier-I and Tier-II capital. Tier-I capital includes common equity and disclosed reserves, while Tier-II capital includes undisclosed reserves, revaluation reserves, and hybrid instruments.
Minimum CRAR Ratio: SPDs must maintain a minimum Capital to Risk-Weighted Assets Ratio (CRAR) of 15%.
Risk Management: SPDs must have a robust risk management framework to identify, assess, and manage various risks, including market risk, credit risk, and operational risk.
Measurement of Risk-Weighted Assets: SPDs must calculate risk-weighted assets using the standardized approach, which takes into account credit risk, market risk, and operational risk.
Regulatory Reporting: SPDs must submit regular reports to the RBI on their capital adequacy, risk management, and regulatory compliance.
Diversification of Activities: SPDs are encouraged to diversify their activities to minimize risk and improve profitability.
Risk Reporting: SPDs must submit regular reports on their derivative business and market risk exposure.
Chat with the Master Circular: