{"id":362611,"date":"2026-05-11T16:31:49","date_gmt":"2026-05-11T11:01:49","guid":{"rendered":"https:\/\/forumias.com\/blog\/?p=362611"},"modified":"2026-05-11T16:40:06","modified_gmt":"2026-05-11T11:10:06","slug":"rbi-revises-capital-adequacy-norms-for-banks","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/rbi-revises-capital-adequacy-norms-for-banks\/","title":{"rendered":"RBI revises capital adequacy norms for banks"},"content":{"rendered":"<div class=\"content-box-green\"><strong>News:<\/strong> The Reserve Bank of India has revised guidelines related to the inclusion of quarterly profits in banks\u2019 core capital calculations, removing an earlier condition linked to provisioning for non-performing assets (NPAs).<\/div>\n<h2 class=\"leftbox-black\"><b>RBI Revises Capital Adequacy Norms for Banks<\/b><img data-recalc-dims=\"1\" decoding=\"async\" src=\"https:\/\/i0.wp.com\/www.thehindubusinessline.com\/theme\/images\/th-online\/1x1_spacer.png?w=750&#038;ssl=1\" alt=\"FILE PHOTO: A Reserve Bank of India (RBI) logo is seen inside its headquarters in Mumbai, India, April 6, 2023. REUTERS\/Francis Mascarenhas\/File Photo\" \/><\/h2>\n<figure id=\"attachment_362619\" aria-describedby=\"caption-attachment-362619\" style=\"width: 300px\" class=\"wp-caption aligncenter\"><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-362619\" src=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/05\/RBI-.jpeg?resize=300%2C225&#038;ssl=1\" alt=\"\" width=\"300\" height=\"225\" srcset=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/05\/RBI-.jpeg?resize=300%2C225&amp;ssl=1 300w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/05\/RBI-.jpeg?resize=1024%2C768&amp;ssl=1 1024w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/05\/RBI-.jpeg?resize=768%2C576&amp;ssl=1 768w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/05\/RBI-.jpeg?w=1200&amp;ssl=1 1200w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><figcaption id=\"caption-attachment-362619\" class=\"wp-caption-text\">Source: DD News<\/figcaption><\/figure>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The Reserve Bank of India has<\/span><b> revised the Capital Adequacy Norms for Banks.\u00a0<\/b><\/li>\n<li style=\"font-weight: 400;\"><b>Aim: <\/b><span style=\"font-weight: 400;\">This aimed at<\/span><b> simplifying the framework used to assess banks\u2019 financial strength and capital adequacy<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Under the revised guidelines,<\/span><b> the RBI has removed an earlier condition related to provisions for non-performing assets (NPAs)<\/b><span style=\"font-weight: 400;\"> while calculating <\/span><b><a href=\"https:\/\/forumias.com\/blog\/question\/consider-the-following-statements-1-the-minimum-capital-to-risk-weighted-assets-ratio-crar-requirement-under-basel-iii-norms-is-11-2-common-equity-tier-1-cet1-capital-shows-the-banks-core-ca\/\">Common Equity Tier 1 (CET1)<\/a> capital for the Capital to Risk Weighted Assets Ratio (CRAR).<\/b>\n<ul>\n<li><strong>Note:<\/strong> The Capital Adequacy Ratio (CAR),<strong> also known as the Capital-to-Risk Weighted Assets Ratio (CRAR)<\/strong>, is a key indicator of a bank\u2019s financial health.<strong> It is the ratio of a bank\u2019s capital to its Risk-Weighted Assets (RWA)<\/strong>.<\/li>\n<li>A <strong>higher CAR<\/strong> means the bank has <strong>more capital buffer<\/strong> relative to the risk it is taking.<\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\"><b>Earlier Rule:<\/b><span style=\"font-weight: 400;\"> Previously,<\/span><b> commercial banks except local area banks and regional rural banks <\/b><span style=\"font-weight: 400;\">could include quarterly profits in CRAR calculations<\/span><b> only if the increase in NPA provisioning during any quarter of the previous financial year did not exceed 25% <\/b><span style=\"font-weight: 400;\">of the average provisions made across all four quarters.<\/span>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">This condition was intended to ensure consistency in <\/span><b>provisioning practices and prevent banks<\/b><span style=\"font-weight: 400;\"> from overstating profits.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\"><b>Changes made: <\/b><span style=\"font-weight: 400;\"> As per the <strong>Reserve Bank of India (Commercial Banks &#8211; Prudential Norms on Capital Adequacy) Fifth Amendment Directions, 2026,<\/strong> banks need to ensure that <strong>quarterly financial statements are either fully audited or subjected to a limited review<\/strong> <strong>before profits<\/strong> can be considered for regulatory capital purposes.<\/span>\n<ul>\n<li>The RBI has also <strong>prescribed a revised formula for determining \u201celigible profit\u201d<\/strong> that can be included in CET1 capital.<\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\"><b>Impact on Banks:\u00a0<\/b>The Amendment is likely:\n<ul>\n<li style=\"font-weight: 400;\">To provide banks with <strong>greater flexibility<\/strong> in recognizing interim profits for capital adequacy purposes<\/li>\n<li style=\"font-weight: 400;\">To ensure that <strong>dividend expectations<\/strong> and <strong>potential losses<\/strong> are adequately <strong>factored<\/strong> into regulatory capital calculations.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>News: The Reserve Bank of India has revised guidelines related to the inclusion of quarterly profits in banks\u2019 core capital calculations, removing an earlier condition linked to provisioning for non-performing assets (NPAs). RBI Revises Capital Adequacy Norms for Banks The Reserve Bank of India has revised the Capital Adequacy Norms for Banks.\u00a0 Aim: This aimed&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/rbi-revises-capital-adequacy-norms-for-banks\/\">Continue reading <span class=\"screen-reader-text\">RBI revises capital adequacy norms for banks<\/span><\/a><\/p>\n","protected":false},"author":10366,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1566,3127,12039],"tags":[11872,11853],"class_list":["post-362611","post","type-post","status-publish","format-standard","hentry","category-daily-factly-articles","category-economy","category-knolls","tag-9pm-daily-factly","tag-dd-news","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/362611","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10366"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=362611"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/362611\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=362611"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=362611"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=362611"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}