What changed
RBI issued a master circular that consolidates all existing instructions on the New Capital Adequacy Framework (NCAF), including Pillar 2 guidelines and amendments issued up to June 30, 2008. This replaces earlier circulars dated April 27, 2007 and March 26, 2008, providing a single document for banks. The circular includes a glossary of terms and lists all modifications/clarifications incorporated.
What it means for you
Banks now have a unified reference for capital adequacy norms, reducing the need to track multiple circulars. The consolidation ensures consistent application of credit risk, market risk, and operational risk capital charges under Pillar 1, along with supervisory review under Pillar 2. Compliance teams must align internal policies with this master circular to avoid regulatory gaps.
What you must do
- Replace all earlier NCAF circulars with this master circular as the primary reference for capital adequacy.
- Update internal capital adequacy policies and procedures to reflect the consolidated guidelines.
- Ensure risk management teams are trained on the glossary and annexures, especially for credit risk mitigation and securitisation.
- Review capital calculations for credit risk, market risk, and operational risk to confirm alignment with the master circular.
Who it affects
All commercial banks (excluding Local Area Banks and Regional Rural Banks), Risk management departments, Compliance and regulatory reporting teams, Capital planning and treasury functions
Does this master circular introduce new capital requirements?
No, it consolidates existing guidelines issued through earlier circulars and mailbox clarifications up to June 30, 2008. No new requirements are added.
Which banks are covered by this circular?
All commercial banks except Local Area Banks and Regional Rural Banks are required to follow these guidelines.
Where can I find the glossary of terms used in the circular?
The glossary is provided in Annex 15 of the master circular, which is available on the RBI website.