The Reserve Bank of India (RBI), on November 28, 2025, issued the Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Directions, 2025, establishing India’s updated Basel III–aligned capital adequacy framework for commercial banks. These Directions apply to all commercial banks other than SFBs, PBs and LABs, and define core regulatory concepts such as banking book, credit risk, counterparty credit risk (CCR), CCP, default fund, CET1/AT1/Tier 2 capital, leverage ratio, minority interest, capital buffers, capital conservation buffer and D-SIB norms.
The Directions set out the full structure of regulatory capital—Common Equity Tier 1, Additional Tier 1, and Tier 2—along with eligibility criteria, loss-absorbency features, triggers for write-down/conversion, regulatory adjustments, and treatment of minority interest and capital issued by subsidiaries. They prescribe methods for calculating risk-weighted assets for credit risk, market risk and operational risk; outline external credit assessment requirements; define credit risk mitigation techniques; and specify ICAAP, SREP, stress testing and Pillar 3 market discipline disclosures.
The framework further lays down capital buffer requirements (CCB, D-SIB surcharge and countercyclical buffer), leverage ratio norms, consolidation rules, exposure measurement, and detailed reporting formats. It also includes guidelines for infusion of capital into overseas branches, retention/repatriation of profits abroad, and supervisory expectations for internal risk governance. These Directions supersede earlier capital adequacy instructions to the extent of inconsistency. [Notification No. RBI/DOR/2025-26/151]
