The Reserve Bank of India has amended its capital adequacy directions for small finance banks to change the treatment of current-year profits in Common Equity Tier 1 capital. The revision allows a bank to reckon profits for capital to risk-weighted assets ratio calculation on a quarterly basis, subject to specified conditions, and takes effect immediately. Quarterly profits can be included only if the financial statements are audited or subject to a limited review each quarter. Eligible profit up to quarter t must be calculated as net profit up to that quarter minus 0.25 times the average dividend paid during the last three financial years multiplied by t. Any cumulative net loss up to the quarter end must be fully deducted when calculating CET1 capital for the relevant quarter.
Reserve Bank of India 2026-05-08
Reserve Bank of India revises how small finance banks can include quarterly profits in CET1 capital
The Reserve Bank of India has amended capital adequacy rules for small finance banks to allow inclusion of current-year profits in Common Equity Tier 1 capital on a quarterly basis, effective immediately. Quarterly profits may be recognised for capital to risk-weighted assets ratio purposes only where financial statements are audited or subject to limited review, with eligible profit defined as net profit up to the quarter minus 0.25 times the average dividend of the last three financial years multiplied by the number of quarters.