RBI Seeks Comments on CET1 Capital for CRAR

The Reserve Bank of India (RBI) has issued draft amendment directions to review the guidelines on the inclusion of quarterly profits in Common Equity Tier 1 (CET1) capital for the purpose of computing the Capital to Risk-weighted Assets Ratio (CRAR) of banks.

1. Objective of the Draft Amendment

The proposal aims to:

• Simplify the regulatory framework for capital computation
• Align treatment of interim profits with evolving supervisory expectations
• Enhance clarity and consistency in CRAR calculations

2. Key Proposed Change

The draft proposes to remove the condition relating to deviation in incremental Non-Performing Asset (NPA) provisions

This condition earlier acted as a constraint on the inclusion of quarterly profits in CET1 capital.

3. Implications for Banks

If implemented, the amendment may:

• Provide greater flexibility in recognising interim profits as capital
• Reduce operational complexity in compliance
• Potentially improve capital adequacy positioning

4. Public Consultation

• The RBI has invited comments and feedback from stakeholders
• The last date for submission of comments is 29th April 2026

5. Conclusion

The draft directions reflect RBI’s intent to streamline capital adequacy norms while maintaining prudential safeguards, with stakeholder inputs expected to shape the final framework.