Reserve Bank of India (Commercial Banks - Prudential Norms on Capital Adequacy) Directions, 2025 (Updated as on July 01, 2026)

RBI/DOR/2025-26/151 DOR.CAP.REC.70/21-01-002/2025-26 November 28, 2025 Previous Versions

Reserve Bank of India (Commercial Banks - Prudential Norms on Capital Adequacy) Directions, 2025 (Updated as on July 01, 2026)

Table of Contents

Chapter I Preliminary A Short title and commencement B Applicability C Definitions

Chapter II Board approved policies and scope of application A Instructions regarding Board approved policies and documents to be reviewed by the Board B Scope of application of capital adequacy framework

Chapter III Regulatory capital A Composition of regulatory capital B Common Equity Tier 1 (CET1) capital C Additional Tier 1 (AT1) capital D Tier 2 capital E Minimum requirements to ensure loss absorbency of Additional Tier 1 (AT1) Instruments at pre-specified trigger and of all non-equity regulatory capital instruments at the point of non-viability F Recognition of minority interest (i.e., non-controlling interest) and other capital issued out of consolidated subsidiaries that is held by third parties G Regulatory adjustments / deductions H Guidelines on general permission for infusion of capital in overseas banking centres and retention / repatriation / transfer of profits in these centres by banks incorporated in India

Chapter IV Risk weighted assets (RWAs) A Capital charge for credit risk B External credit assessments C Credit risk mitigation D Capital charge for market risk E Capital charge for operational risk

Chapter V Supervisory Review and Evaluation Process (SREP) and Market Discipline A Introduction to SREP under Pillar 2 B Internal capital adequacy assessment process (ICAAP) of a bank C Select operational aspects of the internal capital adequacy assessment process (ICAAP) D Format of an internal capital adequacy assessment process (ICAAP) document E Market discipline

Chapter VI Capital buffers A Capital conservation buffer (CCB) framework B Capital requirements applicable to banks designated as D-SIB C Countercyclical capital buffer (CCCB)

Chapter VII Leverage ratio framework A Minimum requirement, and scope of application of the leverage ratio B Scope of consolidation C Capital measure D Exposure measure E Disclosure and reporting requirements F Disclosure templates

Chapter VIII Repeal and Other provisions

Annex I Reporting format for details of investments by FIIs and NRIs in PNCPS qualifying as AT1 capital Annex II Format for reporting of capital issuances Annex III Pillar 3 Disclosure requirements Annex IV Guidelines on Stress Testing A. General B. Level of application C. Objective D. Classification of banks for the purpose of stress testing E. Governance F. Design G. Review of stress testing H. Coverage I. Pipeline and warehousing risk J. Reputational and other off-balance sheet risks K. Risks from leveraged counterparties L. Management intervention action M. Single factor stress tests to be carried out by a bank N. Sensitivity analysis – shocks

In exercise of the powers conferred by section 35A of the Banking Regulation Act (BR Act), 1949 the Reserve Bank of India being satisfied that it is necessary and expedient in the public interest and in the interest of banking policy so to do, hereby, issues the Directions hereinafter specified.

Chapter I Preliminary

A Short title and commencement

1. These Directions shall be called the Reserve Bank of India (Commercial Banks - Prudential Norms on Capital Adequacy) Directions, 2025.

2. These Directions shall come into effect immediately upon issuance.

B Applicability

3. These Directions shall be applicable to Commercial Banks (hereinafter collectively referred to as 'banks' and individually as a 'bank').

For the purpose of these Directions, ‘Commercial Banks’ means banking companies (other than Small Finance Banks, Payment Banks, and Local Area Banks), corresponding new banks, and the State Bank of India, as defined respectively under clauses (c), (da), and (nc) of Section 5 of the Banking Regulation Act, 1949.

C Definitions

4. In these Directions, unless the context states otherwise, the terms herein shall bear the meanings assigned to them below:

(1) ‘Banking book’ shall mean all items which are not included under trading book as per these Directions;

(2) ‘Capital Market Exposure’ shall have the same meaning as defined in Reserve Bank of India (Commercial Banks – Concentration Risk Management) Directions, 2025;

(3) ‘Central Counterparty’ (CCP) is a clearing house that interposes itself between counterparties to contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer and thereby ensuring the future performance of open contracts. A CCP becomes counterparty to trades with market participants through novation, an open offer system, or another legally binding arrangement. For the purposes of the capital framework, a CCP is a financial institution;

(4) ‘Clearing Member’ is a member of, or a direct participant in, a CCP that is entitled to enter into a transaction with the CCP, regardless of whether it enters into trades with a CCP for its own hedging, investment, or speculative purposes or whether it also enters into trades as a financial intermediary between the CCP and other market participants. For these Directions, where a CCP has a link to a second CCP, that second CCP is to be treated as a clearing member of the first CCP. Whether the second CCP’s collateral contribution to the first CCP is treated as initial margin or a default fund contribution shall depend upon the legal arrangement between the CCPs. In such cases, if any, the Reserve Bank shall be consulted for determining the treatment of this initial margin and default fund contributions;

(5) ‘Client’ in the context of transactions with a CCP is a party to a transaction with a CCP through either a clearing member acting as a financial intermediary, or a clearing member guaranteeing the performance of the client to the CCP;

(6) ‘Counterparty Credit Risk (CCR)’ is the risk that the counterparty to a transaction could default before the final settlement of the transaction's cash flows. An economic loss would occur if the transactions or portfolio of transactions with the counterparty has a positive economic value at the time of default. Unlike a bank’s exposure to credit risk through a loan, where the exposure to credit risk is unilateral and only the lending bank faces the risk of loss, CCR creates a bilateral risk of loss i.e., the market value of the transaction can be positive or negative to either counterparty to the transaction. The market value is uncertain and can vary over time with the movement of underlying market factor;

(7) ‘Credit Risk’ is defined as the potential that a bank's borrower or counterparty may fail to meet its obligations in accordance with agreed terms. It is also the possibility of losses associated with diminution in the credit quality of borrowers or counterparties;

(8) ‘Credit Valuation Adjustment’ is an adjustment to the mid-market valuation of the portfolio of trades with a counterparty. This adjustment reflects the market value of the credit risk due to any failure to perform on contractual agreements with a counterparty. This adjustment may reflect the market value of the credit risk of the counterparty or the market value of the credit risk of both the bank and the counterparty;

(9) ‘Cross Product Netting’ refers to the inclusion of transactions of different product categories within the same netting set;

(10) ‘Current Exposure’ is the larger of zero, or the market value of a transaction or portfolio of transactions within a netting set with a counterparty that would be lost upon the default of the counterparty, assuming no recovery on the value of those transactions in bankruptcy. Current exposure is often also called Replacement Cost;