Reserve Bank of India Updates Bank Capital and Leverage Ratios

The Reserve Bank of India updated capital and leverage ratio frameworks for banks, with the new regulations scheduled to take effect on April 1, 2027. These updates align with the leverage ratio 2017 standard established by the Basel Committee on Banking Supervision.

Under the new leverage ratio framework, domestic systemically important banks must maintain a minimum ratio of 4%, while other domestic commercial banks are required to maintain 3.5%. Indian branches of Global Systemically Important Banks must maintain a 3.5% minimum ratio in addition to any buffer prescribed by their home regulators.

The central bank also tightened operational risk capital norms. These revisions change how lenders classify income, value derivative assets, and utilize historical loss data. The updated operational risk framework categorizes business indicators into three specific components: the Interest, Lease and Dividend Component; the Services Component; and the Financial Component.