The Reserve Bank of India has amended its capital adequacy directions for commercial banks to change how profits earned during the current financial year may be included in Common Equity Tier 1 capital for capital to risk-weighted assets ratio calculations. Banks may reckon current-year profits on a quarterly basis, but only where quarterly financial statements are audited or subjected to limited review and the eligible amount is calculated under a prescribed formula. The amendment replaces paragraph 12(x) of the 2025 Master Direction. Eligible profit up to quarter t is defined as net profit up to that quarter minus 0.25 multiplied by the average dividend paid during the last three financial years and by t, with t ranging from 1 to 4. Any cumulative net loss up to a quarter-end must be fully deducted when calculating Common Equity Tier 1 capital for that quarter. The revised directions take effect immediately.
Reserve Bank of India 2026-05-08
Reserve Bank of India revises quarterly profit inclusion in Common Equity Tier 1 capital for commercial banks
The Reserve Bank of India has amended its capital adequacy directions to allow commercial banks to include current-year profits in Common Equity Tier 1 capital on a quarterly basis, subject to audited or limited review financials and a prescribed formula. Eligible profit up to quarter t is defined as net profit minus 0.25 times the average dividend of the last three financial years times t, while any cumulative net loss must be fully deducted from Common Equity Tier 1 capital.