The Reserve Bank of India (RBI) has issued the Eleventh Amendment Directions, 2026 to its prudential norms on capital adequacy, revising the leverage ratio framework for commercial banks. The changes are aimed at aligning India’s framework with the Basel Committee’s 2017 leverage ratio standard and will take effect from April 1, 2027.
Under the revised framework, the minimum leverage ratio will remain at 4% for Domestic Systemically Important Banks (D-SIBs) and 3.5% for other banks. Indian branches of Global Systemically Important Banks (G-SIBs) will be required to maintain a minimum 3.5% leverage ratio plus the applicable G-SIB leverage buffer.
The RBI has also strengthened requirements concerning how banks calculate their leverage exposure. The exposure measure will cover on-balance-sheet assets, derivative exposures, securities financing transactions and off-balance-sheet items. Banks are specifically required to remain vigilant against structures designed to minimise leverage exposure, including certain collateral swaps, agency arrangements and transactions that move assets off balance sheet.
For G-SIB branches, failure to meet applicable leverage or CET1 requirements can trigger capital conservation constraints, with minimum conservation ratios ranging from 40% to 100% of earnings, depending on the level of capital shortfall.
The revised rules also require banks to publicly disclose their Basel III leverage ratio quarterly, on both standalone and consolidated bases, and report detailed calculations to the RBI.
The changes reinforce leverage management as an important component of banks’ capital and risk-management frameworks.
Want to deepen your expertise beyond today’s news?
Explore practical certification courses designed for banking, risk, insurance, compliance, ESG, AI, and emerging technologies professionals.
Learn from industry experts and earn certifications from RMAI and BFSI Sector Skill Council of India.
#Riskmanagementnews
