Reserve Bank of India revises bank leverage ratio norms

The Reserve Bank of India (RBI) has issued new directions to align the country’s leverage-ratio framework with the 2017 Basel Committee standards. Effective April 1, 2027, the amendments establish minimum leverage ratios of 4% for domestic systemically important banks (D-SIBs) and 3.5% for other banks.

Indian branches of global systemically important banks (G-SIBs) are required to maintain a 3.5% ratio plus their applicable G-SIB leverage-ratio buffer, including any additional buffers prescribed by their home regulators. Failure to meet these buffer requirements will result in capital-distribution constraints.

The revised rules address various exposure-measure components, including regulatory deductions, securitisations, unsettled trades, cash pooling, and off-balance-sheet items. Banks must publicly disclose their quarterly ratios on both standalone and consolidated bases and submit detailed calculations to the RBI’s Department of Supervision.

While stakeholders previously requested more time to transition to the new framework, the RBI maintained the April 2027 implementation date to ensure alignment with Basel III compliance mandates.