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The Reserve Bank of India (RBI) has found errors in Indian bank’s calculation of capital and risk-related assets during its inspection in 2026. The RBI found that the bank had counted ₹2,470 crore incorrectly as capital and had underestimated its risk-weighted assets by ₹22,079 crore.
What Indian Bank Did
Indian Bank had included ₹3,823 crore in provisions for certain standard assets that showed signs of possible financial stress as part of its general reserves. The bank had also counted ₹2,470 crore as Tier 2 capital. However, the RBI found that this amount had been wrongly included in the bank’s capital calculation.
Another issue is related to undrawn loans, which are approved credit amounts that borrowers have not yet used. Some of these loan accounts had a clause allowing the bank to cancel the unused amount without conditions. Indian Bank did not apply the required Credit Conversion Factor (CCF) to these exposures because it believed the cancellation clause in the loan documents was sufficient.
What RBI said
The RBI found that Indian Bank had not calculated certain figures correctly. The bank had counted ₹2,470 crore more than the amount accepted by the RBI as Tier 2 capital. It had also reported lower risk-weighted assets because it had not applied the required factor to certain unused loan amounts.
Risk-weighted assets are a way of measuring the risk associated with a bank’s loans and other exposures. Riskier assets generally require a bank to maintain more capital. If a bank reports lower risk-weighted assets than required, its capital adequacy ratio may appear higher than it should be.
Tier 2 capital is an additional part of a bank’s regulatory capital that can help absorb losses. However, only amounts that meet the applicable rules can be included in this calculation.
Bank’s Figures Compared with RBI’s Assessment
The RBI’s assessment changed Indian Bank’s reported capital ratios as of March 31, 2026.
| Particulars | Bank’s calculation | RBI’s assessment |
|---|---|---|
| Credit Risk-Weighted Assets | ₹3,76,320 crore | ₹3,98,512 crore |
| Total Risk-Weighted Assets | ₹4,37,546 crore | ₹4,59,737 crore |
| Common Equity Tier 1 (CET1) Capital | ₹71,764 crore | ₹71,764 crore |
| Tier 2 Capital | ₹6,704 crore | ₹4,234 crore |
| CET1 Capital Adequacy Ratio | 16.40% | 15.61% |
| Tier 2 Capital Adequacy Ratio | 1.53% | 0.92% |
| Total Capital Adequacy Ratio | 17.93% | 16.53% |
The bank’s total risk-weighted assets were assessed at ₹4,59,737 crore by the RBI, compared with ₹4,37,546 crore calculated by the bank. The RBI also assessed Tier 2 capital at ₹4,234 crore, against the bank’s earlier figure of ₹6,704 crore.
As a result, the bank’s total capital adequacy ratio declined from 17.93% to 16.53%, while its CET1 ratio fell from 16.40% to 15.61%.
What Is the Capital Adequacy Ratio?
The capital adequacy ratio shows how much capital a bank has compared with the risks associated with its loans and other assets. It helps indicate whether the bank has sufficient capital to absorb potential losses.
A higher ratio generally provides a stronger capital buffer, while a lower ratio means that the buffer is smaller relative to the risks being measured.
The RBI assessed Indian Bank’s total capital adequacy ratio at 16.53%. This remained above the RBI’s prescribed minimum of 11.50%. The bank’s CET1 ratio of 15.61% was also above the required minimum of 5.50%.
What Indian Bank said?
Indian Bank has clarified that the RBI’s assessment will not affect the net profit reported for the financial year ended March 31, 2026. The bank also said it had already included the RBI’s observations in its calculations of risk-weighted assets and capital ratios for the quarter ended September 30, 2026.
