The Reserve Bank of India has finalized amendments to commercial banks’ capital adequacy rules to implement the Basel Committee on Banking Supervision’s 2017 leverage ratio standard from April 1, 2027, following its August consultation. The framework sets minimum leverage ratios of 4% for domestic systemically important banks and 3.5% for other banks. Indian branches of global systemically important banks must meet a 3.5% minimum plus their applicable global systemically important bank leverage ratio buffer, including any additional buffer prescribed by their home regulator. Branches that fall short of buffer requirements face capital distribution constraints. Where both risk-based capital and leverage requirements are breached, the higher applicable capital conservation standard applies. The amendments revise how banks measure exposures, generally using gross accounting values and restricting netting and recognition of collateral. Banks using the standardised approach for counterparty credit risk must calculate derivative exposures as 1.4 times the sum of replacement cost and potential future exposure, with conditional recognition of cash variation margin and additional treatment for written credit derivatives. Separate provisions govern unsettled trades, cash pooling and securities financing transactions. Off-balance-sheet exposures use the specified credit conversion factors without the transition period available for certain factors under the credit risk rules. Banks must meet the minimum leverage ratio at all times, calculate capital and exposure measures at quarter-end, and publicly disclose quarterly ratios on both standalone and consolidated bases. Detailed calculations must also be reported quarterly to the Reserve Bank. Transactions that inadequately capture leverage may attract additional reporting, operational requirements or a Pillar 2 capital charge. In exceptional macroeconomic circumstances, the Reserve Bank may temporarily exclude central bank reserves from exposures, but must raise the minimum ratio commensurately. Banks must disclose the exemption’s impact alongside their ratio calculated without it.
Reserve Bank of India finalizes Basel leverage ratio rules for commercial banks from April 2027
The Reserve Bank of India has finalized commercial bank leverage ratio rules aligned with the Basel 2017 standard, effective April 1, 2027, following its August consultation. Minimum ratios are 4% for domestic systemically important banks and 3.5% for other banks, while Indian branches of global systemically important banks must also meet applicable buffers or face distribution constraints. The rules revise exposure calculations, including derivatives and securities financing transactions, and require quarterly public disclosure and supervisory reporting.