The Reserve Bank of India (RBI) on October 23, 2026, issued the Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Eleventh Amendment Directions, 2026 to further amend the Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Directions, 2025.
The following amendments have been stated:
• For paragraphs 265 and 266, the following shall be substituted, namely:
"265. General measurement principle
(1) The leverage ratio exposure measure generally follows gross accounting values.
Note - If a long settlement transaction is classified as a derivative according to the applicable accounting standards, the Basel III leverage ratio exposure measure has to be calculated according to paragraph 267 / 267A on 'Derivative exposures'. Similarly, if a failed trade is classified as a receivable according to the applicable accounting standards, the exposure measure has to be calculated according to paragraph 266 on 'On-balance sheet exposures'. Securities financing transactions (SFTs) that have failed to settle are excluded from the described treatment and their exposure measure must be calculated according to paragraph 268 on 'Securities Financing Transaction (SFT) exposures'.
(2) Unless specified differently below, a bank shall not (i) take account of physical or financial collateral, guarantees or other credit risk mitigation techniques to reduce the leverage ratio exposure measure; and (ii) net assets and liabilities.
(3) Any item deducted from Tier 1 capital and regulatory adjustments other than those related to liabilities shall be deducted from the leverage ratio exposure measure. A non-exhaustive list of examples is provided below:
(i) where a banking, financial or insurance entity is not included in the regulatory scope of consolidation, the amount of any investment in the capital of that entity that is totally or partially deducted from CET1 capital or from AT1 capital of the bank following the corresponding deduction approach in paragraph 28, shall also be deducted from the leverage ratio exposure measure;
(ii) prudent valuation adjustments (PVAs) for exposures to less liquid positions, other than those related to liabilities, that are deducted from Tier 1 capital as per paragraph 213 of these Directions, shall be deducted from the leverage ratio exposure measure.
(4) Liability items shall not be deducted from the leverage ratio exposure measure. For example, gains / losses on fair valued liabilities or accounting value adjustments on derivative liabilities due to changes in the bank's own credit risk as described in paragraph 28(5) of these Directions shall not be deducted from the leverage ratio exposure measure.
(5) With regard to traditional securitisations, an originating bank may exclude securitised exposures from its leverage ratio exposure measure if the securitisation meets the operational requirements for the recognition of risk transference as described in paragraph 96 of these Directions. A bank meeting these conditions shall include any retained securitisation exposures in its leverage ratio exposure measure. In all other cases, for example traditional securitisations that do not meet the operational requirements for the recognition of risk transference or synthetic securitisations, the securitised exposures shall be included in the leverage ratio exposure measure.
(6) A bank shall be particularly vigilant to transactions and structures that have the result of inadequately capturing its sources of leverage. An illustrative list of examples of concerns that may arise in such leverage ratio exposure measure minimising transactions and structures includes:
(i) SFTs where exposure to the counterparty increases as the counterparty's credit quality decreases or SFTs in which the credit quality of the counterparty is positively correlated with the value of the securities received in the transaction (i.e., the credit quality of the counterparty falls when the value of the securities falls);
(ii) a bank that normally acts as principal but adopts an agency model to transact in derivatives and SFTs in order to benefit from the more favourable treatment permitted for agency transactions under the leverage ratio framework;
(iii) collateral swap trades structured to mitigate inclusion in the leverage ratio exposure measure; or
(iv) use of structures to move assets off the balance sheet.
Where the Reserve Bank has concerns that such transactions are not adequately captured in the leverage ratio exposure measure or may lead to a potentially destabilising deleveraging process, it may consider a range of actions to address such concerns. Supervisory actions may inter alia include requiring enhancements in a bank's management of leverage, imposing operational requirements (e.g., additional supervisory reporting) and / or requiring that the relevant exposure is adequately capitalised through a Pillar 2 capital charge.
(7) To facilitate the implementation of monetary policies, the Reserve Bank may temporarily exempt central bank reserves (i.e., balance maintained with the Reserve Bank) from the leverage ratio exposure measure in exceptional macroeconomic circumstances. To maintain the same level of resilience provided by the leverage ratio, the Reserve Bank will also increase the calibration of the minimum leverage ratio requirement commensurately to offset the impact of exempting central bank reserves. In addition, in order to maintain the comparability and transparency of the leverage ratio framework, a bank shall be required to disclose the impact of any temporary exemption alongside ongoing public disclosure of the leverage ratio without application of such exemption.
(8) A bank's total leverage ratio exposure measure is the sum of the following exposures:
(i) on-balance sheet exposures (excluding on-balance sheet derivative and SFT exposures);
(ii) derivative exposures;
(iii) SFT exposures; and
(iv) off-balance sheet (OBS) items.
The specific treatments for these four main exposure types are provided in paragraphs 266 to 269 below.
266. On-balance sheet exposures
(1) A bank shall include all balance sheet assets in its leverage ratio exposure measure, including on-balance sheet derivatives collateral and collateral for SFTs, except for on-balance sheet derivative and SFT assets that are covered in paragraphs 267 / 267A and 268 below.
Note - Where a bank, according to its operative accounting framework, recognises fiduciary assets on the balance sheet, these assets can be excluded from the leverage ratio exposure measure provided that the assets meet the criteria for derecognition and, where applicable, for deconsolidation as per applicable accounting standards.
(2) On-balance sheet, non-derivative assets shall be included in the leverage ratio exposure measure at their accounting values less deductions for associated specific provisions. In addition, general provisions or general loan loss reserves as defined in paragraph 21(i), which have reduced Tier 1 capital, shall be deducted from the leverage ratio exposure measure.
(3) Treatment of unsettled trades
(i) For the purpose of the leverage ratio exposure measure, a bank using trade date accounting for unsettled trades shall reverse out any offsetting between cash receivables for unsettled sales and cash payables for unsettled purchases of financial assets that may be recognised under the applicable accounting framework, but may offset between those cash receivables and cash payables (regardless of whether such offsetting is recognised under the applicable accounting framework) if the following conditions are met:
(a) the financial assets bought and sold that are associated with cash payables and receivables are fair valued through income and included in the trading book as defined in paragraph 4(34); and
(b) the transactions of the financial assets are settled on a delivery-versus-payment (DvP) basis.
Note - For the purposes of this treatment, 'unsettled trades' refer to regular-way purchases or sales of financial assets that have not been settled. 'Regular-way purchases or sales' are purchases or sales of financial assets under contracts for which the terms require delivery of the assets within the time frame established generally by regulation or convention in the marketplace concerned.
(ii) A bank using settlement date accounting will be subject to the treatment set out in paragraphs 269(1), 269(2), 269(3), and 269(4).
(4) Treatment of cash pooling arrangements
(i) For purposes of the leverage ratio exposure measure, where a cash pooling arrangement entails a transfer at least on a daily basis of the credit and / or debit balances of the individual participating customer accounts into a single account balance, the individual participating customer accounts are deemed to be extinguished and transformed into a single account balance upon the transfer provided the bank is not liable for the balances on an individual basis upon the transfer. Thus, the basis of the leverage ratio exposure measure for such a cash pooling arrangement is the single account balance and not the individual participating customer accounts.
(ii) When the transfer of credit and / or debit balances of the individual participating customer accounts does not occur daily, for purposes of the leverage ratio exposure measure, extinguishment and transformation into a single account balance is deemed to occur and this single account balance may serve as the basis of the leverage ratio exposure measure provided all of the following conditions are met:
(a) in addition to providing for the several individual participating customer accounts, the cash pooling arrangement provides for a single account, into which the balances of all individual participating customer accounts can be transferred and thus extinguished;
(b) the bank (i) has a legally enforceable right to transfer the balances of the individual participating customer accounts into a single account so that the bank is not liable for the balances on an individual basis; and (ii) at any point in time, the bank shall have the discretion and be in a position to exercise this right;
(c) the Reserve Bank does not deem as inadequate the frequency by which the balances of individual participating customer accounts are transferred to a single account;
(d) there are no maturity mismatches among the balances of the individual participating customer accounts included in the cash pooling arrangement or all balances are either overnight or on demand; and
(e) the bank charges or pays interest and / or fees based on the combined balance of the individual participating customer accounts included in the cash pooling arrangement.
(iii) In the event the above-mentioned conditions [(a) to (e)] are not met, the individual balances of the participating customer accounts shall be reflected separately in the leverage ratio exposure measure.
Explanation - Cash pooling refers to arrangements involving treasury products whereby a bank combines the credit and / or debit balances of several individual participating customer accounts into a single account balance to facilitate cash and / or liquidity management."
[Notification No. RBI/2026-27/297 DOR.CAP.REC.251/21-02-002/2026-27]
