The Reserve Bank of India has aligned its commercial-bank capital adequacy directions with the Basel leverage-ratio framework. The revised rules cover minimum ratios, derivatives, securities-financing transactions, off-balance-sheet items and disclosures.
BKK Bureau, New Delhi | 24 October 2026 | 12:26 AM IST
The Reserve Bank of India has issued amendments to the prudential norms governing capital adequacy for commercial banks, revising the leverage-ratio framework in line with the Basel Committee on Banking Supervision’s 2017 standard. The Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Eleventh Amendment Directions, 2026 were issued on October 23, 2026, and will take effect from April 1, 2027.
The leverage ratio will continue to be calculated as a bank’s capital measure divided by its exposure measure, expressed as a percentage. Under the amended framework, domestic systemically important banks, or D-SIBs, must maintain a minimum leverage ratio of 4%. The minimum for other banks will be 3.5%. Branches in India of global systemically important banks, or G-SIBs, will be required to maintain a 3.5% minimum plus the leverage-ratio buffer applicable to the relevant G-SIB, including any additional buffer prescribed by its home regulator.
The directions also introduce capital-distribution constraints for G-SIB branches that fail to meet their leverage-ratio buffer. The applicable restriction will depend on both the branch’s common equity Tier 1, or CET1, risk-based capital ratio and its Tier 1 leverage ratio. The RBI’s table specifies minimum capital-conservation ratios ranging from 100% of earnings at the lowest stated capital bands to zero when the CET1 risk-based ratio exceeds 9% and the Tier 1 leverage ratio exceeds 4%, for the first bucket of higher loss-absorbency requirements.
Banks will generally calculate their capital and exposure measures at the end of each quarter. With RBI approval, a bank may use more frequent calculations, such as daily or monthly averages, provided the approach is applied consistently. Banks must meet the minimum leverage-ratio requirement at all times.
The amended framework sets out more detailed methods for measuring exposures. A bank’s total leverage-ratio exposure measure will comprise on-balance-sheet exposures, derivative exposures, securities-financing transaction exposures and off-balance-sheet items. The framework generally relies on gross accounting values and restricts the use of collateral, guarantees, credit-risk mitigation and netting to specified circumstances.
For banks using the standardised approach for counterparty credit risk, a new provision covers derivative exposures. The exposure measure will include replacement cost and potential future exposure, with the prescribed calculation applying a multiplier, or alpha, of 1.4 to their combined amount. The rules also address cash variation margin, collateral, eligible bilateral netting arrangements, written credit derivatives, clearing-member exposures and client-clearing structures.
Separate provisions govern securities-financing transactions, including repos and reverse repos. Banks acting as principals will generally include gross securities-financing assets and a counterparty-credit-risk amount, subject to specified netting conditions. The directions also prescribe treatment for banks acting as agents, including situations where an institution provides an indemnity or guarantee but does not own or control the underlying cash or securities.
Off-balance-sheet commitments, liquidity facilities, credit substitutes, acceptances and letters of credit will be converted into exposure amounts using specified credit-conversion factors. A 100% factor will apply to certain unsettled financial-asset purchases and off-balance-sheet items that function as credit substitutes. The directions also set conditions under which certain securitised exposures may be excluded, while retained exposures must remain included.
For transparency and supervisory monitoring, banks will have to publicly disclose their Basel III leverage ratio every quarter on both standalone and consolidated bases. They must also report the ratio and detailed capital and exposure calculations to the RBI’s Department of Supervision quarterly, along with disclosures in the prescribed Pillar 3 templates.
Why it matters
The revised framework establishes the minimum leverage buffers banks must maintain and standardises how balance-sheet, derivative, securities-financing and off-balance-sheet exposures are counted. It also increases the reporting and disclosure requirements that will apply from April 1, 2027.
Source: Reserve Bank of India
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