No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2024-25/128 · issued 21 Mar 2025 · ~1 min read
Quick answerNBFCs, HFCs, and ARCs no longer need to deduct Right-of-Use (ROU) assets from Owned Fund or CET1 capital if the underlying leased asset is tangible. ROU assets must be risk-weighted at 100%.
What changed
Previously, ROU assets were treated as intangible assets and deducted from regulatory capital. The RBI now clarifies that ROU assets from tangible asset leases are not deducted from Owned Fund, CET1, or Tier 1 capital, and must be risk-weighted at 100%.
What it means for you
This change frees up regulatory capital for lessees, as ROU assets no longer reduce capital ratios. Banks and lenders must ensure ROU assets are correctly classified and risk-weighted, impacting capital adequacy calculations positively for those with significant leased tangible assets.
Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.
What banks were required to do at the time
Review your balance sheet to identify ROU assets from tangible asset leases.
Stop deducting these ROU assets from Owned Fund, CET1, or Tier 1 capital calculations.
Apply a 100% risk weight to all such ROU assets.
Update internal capital adequacy policies and reporting systems accordingly.
Ensure compliance with the updated Master Directions for your entity type.
Who it affects
All NBFCs (including HFCs) implementing Ind AS, Asset Reconstruction Companies (ARCs) implementing Ind AS
❓ Common questions
Regulatory timeline
Decoded by BankPulse2026-06-18 02:25 IST
repealed_by — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
Status change: withdrawn03 Aug 2026, 04:00 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
Does this circular apply to all NBFCs or only those using Ind AS?
It applies to all NBFCs (including HFCs) and ARCs that implement the Companies (Indian Accounting Standards) Rules, 2015.
What if the underlying leased asset is intangible?
The clarification only covers ROU assets where the underlying leased asset is tangible. For intangible assets, existing deduction rules may still apply.
When does this circular take effect?
The circular is applicable with immediate effect from March 21, 2025.
📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
Repealed byRBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
RBI’s words: “Official withdrawal register entry #71: DOR.CAP.REC.No.68/21.01.002/2024-25 — "Treatment of Right-of-Use (ROU) Asset for Regulatory Capital Purposes" dated March 21, 2025”
📜 Read the original circular — full text as issued by RBI
RBI/2024-25/128
DOR.CAP.REC.No.68/21.01.002/2024-25
March 21, 2025
Dear Sir/Madam,
Treatment of Right-of-Use (ROU) Asset for Regulatory Capital Purposes
Please refer to:
a) Paragraphs 5.1.25 and 107.2 of the Master Direction - Reserve Bank of India (Non-Banking Financial Company (NBFC) – Scale Based Regulation) Directions, 2023 - (definition of Owned Fund and Common Equity Tier 1 (CET 1) capital)
b) Paragraph 4.1.28 of the Master Direction - Non-Banking Financial Company - Housing Finance Company (HFC) (Reserve Bank) Directions, 2021 – (definition of Owned Fund)
c) Paragraph 3.(1)(xxii) of the Core Investment Companies (Reserve Bank) Directions, 2016 – (definition of Owned Fund)
d) Paragraph 3(a)(xxv) of the Mortgage Guarantee Companies (Reserve Bank) Directions, 2016 – (definition of Owned Fund)
e) Paragraph 3.1(xi) of the Master Direction – Reserve Bank of India (Asset Reconstruction Companies) Directions, 2024 – (definition of Owned Fund)
f) Paragraph 3(iv) of the Master Direction - Standalone Primary Dealers (Reserve Bank) Directions, 2016 – (definition of Tier 1 capital)
The instructions cited above require deducting the book value of intangible assets while calculating Owned Fund/ CET 1 capital/ Tier 1 capital.
2. In terms of Indian Accounting Standard (Ind AS) 116 - Leases, most leases will be reflected on a lessee's balance sheet as an obligation to make lease payments (a liability) and a related ROU asset (an asset). We have received references from various NBFCs (in their capacity as lessees) on the treatment of ROU assets for calculation of regulatory capital/ Owned Fund.
3. In this regard, it is clarified that regulated entities shall not be required to deduct an ROU asset (created in terms of Ind AS 116-Leases) from Owned Fund/ CET 1 capital/ Tier 1 capital (as the case may be), provided the underlying asset being taken on lease is a tangible asset. The ROU asset shall be risk-weighted at 100 per cent, consistent with the risk weight applied historically to the owned tangible assets.
4. The above revisions/changes have been incorporated in the respective Master Directions, as detailed in Annexure 1 to Annexure to 6 below.
Applicability
5. This circular is applicable, with immediate effect, to all NBFCs (including HFCs) and Asset Reconstruction Companies implementing Companies (Indian Accounting Standards) Rules, 2015.
Yours faithfully,
(Usha Janakiraman)
Chief General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2024-25/128 · issued 21 Mar 2025. The plain-English explanation above is BankPulse’s own independent summary.
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12795&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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