RBI eases rules for banks to include quarterly profits in regulatory capital

MUMBAI, May 8 : The Reserve Bank on Friday eased norms for banks to include current year profits in their capital adequacy calculations on a quarterly basis by removing an additional qualifying condition.

As per extant guidelines, banks are permitted to include quarterly profits to capital, albeit with an “additional qualifying condition” related to non-performing assets (NPAs).

Through a circular, the Reserve Bank of India (RBI) has amended the provision relating to inclusion of quarterly profits in Common Equity Tier 1 (CET1) capital by a bank.

The Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Fifth Amendment Directions, 2026 said a bank may reckon the profits in the current financial year for capital to risk weighted assets ratio (CRAR) calculation on a quarterly basis subject to certain conditions, including a prescribed formula.

There is also a requirement of audit or limited review of financial statements on a quarterly basis.

Similar directions have also been issued for small finance banks and payments banks.

Earlier in April, the RBI had issued draft amendment directions and sought feedback from stakeholders.

In their feedback, stakeholders said retaining yearly CET1 accounting with quarterly reviews offers a more prudent path. However, the RBI did not accept the suggestion. (PTI)