What changed
RBI consolidated and updated the capital adequacy framework for commercial banks into a single comprehensive direction, replacing previous versions. The directions include detailed chapters on capital composition, risk-weighted assets, supervisory review, capital buffers, and leverage ratio. Annexes on stress testing and disclosure requirements are included as part of the consolidated framework.
What it means for you
Banks must ensure their board-approved policies and capital planning comply with the updated framework, including revised definitions and loss absorbency requirements for AT1 instruments. The consolidated directions streamline compliance but require immediate review of capital instruments, risk-weighted asset calculations, and ICAAP documents. Banks designated as D-SIB must adhere to specific buffer requirements.
What you must do
- Review and update board-approved policies on capital adequacy to align with the 2025 directions.
- Ensure all regulatory capital instruments meet the updated loss absorbency criteria at pre-specified trigger and point of non-viability.
- Update ICAAP documents and stress testing frameworks as per Annex IV guidelines.
- Align leverage ratio reporting and disclosure templates with the new requirements.
- Verify compliance with capital buffers, including CCB and countercyclical buffer, for D-SIBs if applicable.
Who it affects
All commercial banks (excluding Small Finance Banks, Payment Banks, and Local Area Banks), Corresponding new banks and State Bank of India, Bank boards and senior management, Risk and compliance teams, Capital planning and treasury departments
What is the effective date of these directions?
The directions came into effect immediately upon issuance on November 28, 2025.
Which banks are covered under these directions?
Commercial banks as defined under the Banking Regulation Act, 1949, including banking companies (excluding Small Finance Banks, Payment Banks, and Local Area Banks), corresponding new banks, and the State Bank of India.
What are the key changes in capital instrument requirements?
The directions specify minimum loss absorbency requirements for Additional Tier 1 instruments at a pre-specified trigger and for all non-equity regulatory capital instruments at the point of non-viability.