The Reserve Bank of India has issued draft amendments to its capital adequacy frameworks that would change how banks can include current-year quarterly profits in Common Equity Tier 1 (CET1) capital for calculating the Capital to Risk-weighted Assets Ratio (CRAR), by removing an existing qualifying condition linked to non-performing asset (NPA) provisioning. Currently, commercial banks (excluding Regional Rural Banks and Local Area Banks) may recognise quarterly profits for CRAR purposes only if incremental provisions for NPAs at the end of any of the four quarters of the previous financial year did not deviate by more than 25 per cent from the average of those four quarters. Following a review, the RBI proposes to do away with this condition and has published corresponding draft amendments to the capital adequacy directions for commercial banks, small finance banks and payments banks. Comments are invited until April 29, 2026 via the Reserve Bank’s ‘Connect 2 Regulate’ portal or other submission channels specified in the consultation.
Reserve Bank of India 2026-04-08
Reserve Bank of India consults on removing the 25 per cent NPA provisioning condition for including quarterly profits in CET1 for CRAR
The Reserve Bank of India has issued draft amendments to its capital adequacy frameworks, changing how banks may include current-year quarterly profits in Common Equity Tier 1 capital for calculating the Capital to Risk-weighted Assets Ratio. The proposal removes the condition that quarterly profit recognition is allowed only if incremental non-performing asset provisions in each quarter of the previous financial year did not deviate by more than 25 per cent from the four-quarter average, and updates capital adequacy directions for commercial, small finance and payments banks.