RBI Relaxes CET1 Capital Norms for Quarterly Profit Inclusion

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  • Last Updated on 12 May, 2026

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CET1 Capital Norms

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. 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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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