RBI Basel III AT1 Capital Directions 2025 – PDI Cap Rules

  • Blog|News|FEMA & Banking|
  • 2 Min Read
  • By Taxmann
  • |
  • Last Updated on 3 October, 2025

Latest from Taxmann

RBI Basel III AT1 Capital Directions 2025

Circular No. DOR.CAP.REC.No.53/21.01.002/2025-26, Dated: 29.09.2025

1. Introduction

The Reserve Bank of India (RBI) has issued new Directions under Basel III Capital Regulations concerning the treatment of Perpetual Debt Instruments (PDIs) within Additional Tier 1 (AT1) capital. These measures are aimed at strengthening the resilience of the banking sector and ensuring prudent management of foreign currency and offshore bond exposures.

2. Cap on PDIs in AT1 Capital

As per the revised framework, the RBI has capped the inclusion of PDIs issued in foreign currency or as rupee-denominated bonds overseas at 1.5% of Risk-Weighted Assets (RWA). This limit is to be calculated based on the most recent audited or reviewed financial statements of the bank. The move ensures that excessive reliance on offshore AT1 instruments does not expose banks to currency or external funding risks.

3. Applicability of the Directions

The new rules apply separately to Scheduled Commercial Banks (SCBs)—excluding Small Finance Banks (SFBs), Payments Banks (PBs), and Regional Rural Banks (RRBs)—as well as to Small Finance Banks and Payments Banks in their respective categories. This clarity ensures uniformity while considering the different regulatory contexts of these institutions.

4. Effective Date and Implementation

The directions will come into effect from October 1, 2025. Banks are expected to review their current capital structures, assess outstanding PDIs, and align their balance sheets with the new cap ahead of the deadline. Early compliance will help mitigate regulatory breaches and reinforce market confidence in the sector’s stability.

5. Conclusion

With these updated directions on PDIs in AT1 capital, the RBI has reinforced its commitment to maintaining a robust, transparent, and risk-sensitive capital framework. By limiting offshore exposure in AT1 instruments, the regulator seeks to safeguard banks from external vulnerabilities while upholding the integrity of Basel III standards in India. This balanced approach supports both financial stability and global alignment of India’s banking regulations.

Click Here To Read The Full Circular

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

Taxmann editorial team

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that’s easy to read and remain consistent across all imprint and digital publications are applied

Leave a Reply

Your email address will not be published. Required fields are marked *

«
»

Everything on Tax and Corporate Laws of India

To subscribe to our weekly newsletter please log in/register on Taxmann.com

Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied