RBI revises capital adequacy norms for banks
The Reserve Bank of India on Friday revised guidelines related to the inclusion of quarterly profits in banks’ core capital calculations, removing an earlier condition linked to provisioning for non-performing assets (NPAs).
In a statement, the RBI said it had issued amendment directions after reviewing feedback received on draft proposals released on April 8, 2026, regarding the inclusion of quarterly profits in Common Equity Tier 1 (CET1) capital for the computation of the Capital to Risk Weighted Assets Ratio (CRAR).
CRAR is a key indicator used to measure a bank’s financial strength and ability to absorb potential losses, while CET1 represents the core capital held by banks.
Under the earlier framework, commercial banks — excluding local area banks and regional rural banks — were permitted to include quarterly profits in CRAR calculations only if incremental provisions for NPAs during any quarter of the previous financial year did not deviate by more than 25 per cent from the average provisions made across all four quarters.
The RBI said the revised framework removes this qualifying condition related to NPA provisions, simplifying the process for banks.
“The Draft Directions were aimed at removing the qualifying condition of incremental provisions for NPAs,” the central bank said.
The RBI added that stakeholder feedback on the draft framework had been examined before finalising the amendment directions.
The central bank has issued separate amendment directions for commercial banks, small finance banks and payments banks.
The revised norms are expected to streamline quarterly capital calculations and provide banks with a simpler framework for including quarterly profits in capital adequacy assessments. (ANI)
