The RBI has released Draft Directions on Prudential Norms on Capital Adequacy.
The minimum leverage ratio for a domestic systemically important bank (D-SIB) shall be 4 per cent and 3.5 per cent for other banks. Branch of a global systemically important bank (G-SIB) in India (hereinafter referred to as ‘G-SIB branch’) shall maintain a leverage ratio of 3.5 per cent plus the leverage ratio buffer applicable to it as a G-SIB (including any additional leverage ratio buffer prescribed by the home regulator).
Capital distribution constraints will be imposed on a G-SIB branch which does not meet its leverage ratio buffer requirement. The capital distribution constraints imposed on the branch will depend on its common equity tier 1 (CET1) risk-based ratio and its leverage ratio as under:
(i) A G-SIB branch which meets both its CET1 risk-based capital requirements (defined as a 5.5 per cent minimum requirement, a 2.5 per cent capital conservation buffer, the G-SIB higher loss-absorbency requirement, and countercyclical capital buffer if applicable) and its Tier 1 leverage ratio requirement (defined as a 3.5 per cent leverage ratio minimum requirement and the G-SIB leverage ratio buffer) will not be subject to minimum capital conservation standards.
(ii) A G-SIB branch which does not meet one of these requirements will be subject to the associated minimum capital conservation standards.
(iii) A G-SIB branch which does not meet both requirements will be subject to the higher minimum capital conservation standard related to its risk-based capital requirement or leverage ratio.
Click here to download RBI New Rules on Prudential Norms on Capital Adequacy
