What changed
RBI issued amendments to the Prudential Guidelines on Capital Adequacy and Market Discipline (NCAF) following clarifications sought by banks during the parallel run. The amendments are specified in the Annex to this circular and take effect from March 31, 2008. All other provisions of the earlier April 27, 2007 circular remain unchanged except as modified by this Annex.
What it means for you
Banks must immediately adopt the amended NCAF guidelines as detailed in the Annex, which address practical issues encountered during the parallel run. This ensures smoother transition to the Revised Framework and aligns regulatory expectations with on-ground implementation challenges. Lenders should review the Annex carefully to update their capital adequacy and market discipline processes.
What you must do
- Review the Annex to this circular for specific amendments to the NCAF guidelines.
- Update internal capital adequacy and market discipline policies to reflect the changes with immediate effect.
- Ensure parallel run processes are aligned with the amended guidelines for a smooth transition to the Revised Framework.
- Communicate the amendments to relevant risk and compliance teams for implementation.
Who it affects
All Commercial Banks (excluding Local Area Banks and Regional Rural Banks)
What prompted these amendments to the NCAF guidelines?
The amendments were made in response to clarifications sought by banks during the parallel run of the new capital adequacy framework, as per the draft guidelines of February 15, 2005.
When do these amendments take effect?
The amendments come into force with immediate effect from the date of the circular, March 31, 2008.
Do these amendments replace the entire April 27, 2007 circular?
No, only the provisions modified as per the Annex are changed; all other provisions of the April 27, 2007 circular remain unchanged.