RBI Relaxes CET1 Capital Norms for Quarterly Profit Inclusion

PR no. 2026-2027/227; Dated: 08.05.2026

The Reserve Bank of India (RBI) has issued amendment directions relaxing the framework governing inclusion of quarterly profits in Common Equity Tier-1 (CET1) capital for computation of the Capital to Risk-Weighted Assets Ratio (CRAR) of banks.

1. Earlier Requirement

Previously, banks could include quarterly profits in CET1 capital only if:

• Incremental provisions for Non-Performing Assets (NPAs) in any quarter of the previous financial year:

1. 1. Did not deviate by more than 25%
   2. From the average incremental provisions of the preceding four quarters

This acted as an additional qualifying condition for capital recognition.

2. Revised Framework

• RBI has now removed the above qualifying condition
• As a result banks can include eligible quarterly profits in CET1 capital without satisfying the earlier NPA provisioning deviation test

3. Objective of the Amendment

The relaxation aims to:

• Simplify capital computation norms
• Provide greater operational flexibility to banks
• Reduce regulatory complexity in recognition of interim profits

4. Regulatory Impact

The amendment is expected to:

• Facilitate smoother capital planning and reporting
• Improve ease of compliance for banks
• Maintain prudential capital adequacy framework while removing restrictive conditions

5. Conclusion

The revised directions reflect RBI’s move towards a more streamlined and principle-based approach for recognition of quarterly profits in CET1 capital, easing compliance while supporting efficient capital management by banks.

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