Current · Source: Reserve Bank of India · RBI/2026-27/81 · issued 08 May 2026 · ~1 min read
Quick answerRBI amends capital adequacy norms for Payments Banks, allowing quarterly profit inclusion in CET1 capital.
The rule, in the simplest words
Payments Banks can now add their quarterly profits to their CET1 capital (a type of safety cushion for the bank).
The bank must get its financial statements checked by an auditor every three months (quarterly audit or limited review).
To find the eligible profit, use this formula: eligible profit = net profit for the quarter minus one-quarter of the average dividends paid in the last three years.
If the bank has any net losses (money lost) up to the end of the quarter, those losses must be subtracted from the CET1 capital.
How it plays out — a real example
A credit & lending officer in Indore, Priya, works for a Payments Bank. She updates her bank's capital calculations to include the quarterly profit of ₹2 crore, after subtracting one-quarter of the average dividends paid over the last three years. She ensures the bank's quarterly financial statements are audited, so the bank's safety cushion (CET1 capital) looks stronger and meets RBI rules.
What changed
The RBI has amended the provision relating to inclusion of quarterly profits in Common Equity Tier 1 (CET1) capital by a Payments Bank. The amendment modifies the Master Direction issued in 2025.
What it means for you
This change allows Payments Banks to include quarterly profits in CET1 capital, subject to conditions such as quarterly audits and a specified formula, which may improve their capital adequacy ratios.
What you must do
Review and update your capital adequacy calculations to reflect the new provision.
Ensure that your financial statements are audited or subjected to limited review on a quarterly basis.
Calculate the eligible profit using the specified formula and deduct cumulative net losses from CET1 capital.
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
What is the new provision for including quarterly profits in CET1 capital?
The new provision allows Payments Banks to include quarterly profits in CET1 capital, subject to conditions such as quarterly financial statement audits and use of a specified formula.
What is the effective date of the amendment?
The amendment comes into force with immediate effect.
📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
📜 Read the original circular — full text as issued by RBI
RBI/2026-27/81
DOR.CAP.REC.No.70/21.01.002/2026-27
May 08, 2026
Reserve Bank of India (Payments Banks - Prudential Norms on Capital Adequacy) Second Amendment Directions, 2026
The Reserve Bank had issued the Reserve Bank of India (Payments Banks – Prudential Norms on Capital Adequacy) Directions, 2025 (hereinafter referred as the 'Master Direction'), on November 28, 2025, as amended from time to time. Based on a review, it is proposed to amend the provision relating to inclusion of quarterly profits in Common Equity Tier 1 (CET1) capital by a Payments Bank.
2. Accordingly, in exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949 and all other provisions / laws enabling the Reserve Bank of India in this regard, the Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Amendment Directions hereinafter specified.
3. These instructions shall be called the Reserve Bank of India (Payments Banks - Prudential Norms on Capital Adequacy) Second Amendment Directions, 2026.
4. These Directions shall come into force with immediate effect.
5. These Amendment Directions modify the Master Direction as under:
Paragraph 9(x) shall be replaced by:
"(x) A bank may reckon the profits in current financial year for CRAR calculation on a quarterly basis subject to the following conditions:
(a) The financial statements shall be audited or subjected to limited review on a quarterly basis; and
(b) The amount which can be reckoned shall be arrived at by using the following formula:
EP t = NP t - 0.25 *D*t
Where:
EP t = Eligible profit up to quarter 't' of the current financial year, t varies from 1 to 4
NP t = Net profit up to quarter 't'
D = average dividend paid during the last three financial years
The cumulative net loss up to the quarter end shall be fully deducted while calculating CET1 capital for the relevant quarter;"
Yours faithfully,
(Sunil T S Nair)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2026-27/81 · issued 08 May 2026. The plain-English explanation above is BankPulse’s own independent summary.
Review and update your capital adequacy calculations to reflect the new provision.
Calculate the eligible profit using the specified formula and deduct cumulative net losses from CET1 capital.
📜 Compliance
Ensure that your financial statements are audited or subjected to limited review on a quarterly basis.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are an IT/Systems lead at a bank this circular applies to (Payments Banks), your first concrete step on “RBI Amends Prudential Norms for Payments Banks” is: “Review and update your capital adequacy calculations to reflect the new provision.” (RBI issued this 08 May 2026).
Circular: RBI/2026-27/81 -- RBI Amends Prudential Norms for Payments Banks
Issued: 08 May 2026
Action required: Review and update your capital adequacy calculations to reflect the new provision.
Action required: Ensure that your financial statements are audited or subjected to limited review on a quarterly basis.
Action required: Calculate the eligible profit using the specified formula and deduct cumulative net losses from CET1 capital.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
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 02 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=13448&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.
Help us keep this accurate
Found an inaccuracy or have an improvement? Tell us. Every report is reviewed by our team before any change is made — nothing goes live unverified.
Public beta — plain-English informational summaries. Always verify against the official RBI source (circular number cited on every page) before making compliance, credit, treasury, audit, or operational decisions. · Join our WhatsApp channel ↗
BANKPULSE · FREE DAILY BRIEF
Get RBI updates for your role
Every important RBI update, decoded in plain English — for your career, exams & financial awareness.
We collect only your email, name and role, used solely to send your brief — never sold or shared. Withdraw anytime via the unsubscribe link in any email. Independent platform, not affiliated with the RBI. Information, not legal advice.
REPORT AN ERROR · BETA
Spotted an error? Earn 500 BankPulse Credits
Help us stay accurate. If your correction is verified true and approved by our founder, you earn 500 BankPulse Credits — redeemable when the platform monetises.
Reviewed by a human before any credit is awarded. We never change the site from crowd input without verification.
WANT A NEW FEATURE · BETA
What would make BankPulse more useful for you?
Tell us what to build next — a tool, a data view, a role page, anything. We read every suggestion.
Thank you — your ideas directly shape what we build.