The Reserve Bank of India (RBI) on May 08, 2026, issued the Reserve Bank of India (Small Finance Banks - Prudential Norms on Capital Adequacy) Fourth Amendment Directions, 2026, further to amend the Reserve Bank of India (Small Finance Banks – Prudential Norms on Capital Adequacy) Directions, 2025.
The following has been stated:
• The amendment revises the norms for inclusion of current year profits in Common Equity Tier 1 (CET1) capital for Capital to Risk Weighted Assets Ratio (CRAR) calculation by Small Finance Banks. Under the revised provision, banks may now include quarterly profits in CET1 capital on a quarterly basis, provided that the financial statements are either audited or subjected to limited review every quarter.
• The eligible profit amount will be calculated using the formula: Eligible Profit (EPt) = Net Profit up to the quarter (NPt) minus 25% of the average dividend paid during the last three financial years multiplied by the relevant quarter number.
• The amendment also clarifies that any cumulative net loss up to the relevant quarter shall be fully deducted while computing CET1 capital.
[Notification no. - RBI/2026-27/80 DOR.CAP.REC.No.69/21.01.002/2026-27]
