Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Eleventh Amendment Directions, 2026

The Eleventh Amendment Directions revise Chapter VII of the RBI’s 2025 capital-adequacy Directions. The purpose is alignment with the Basel Committee on Banking Supervision’s latest leverage-ratio framework, called the “leverage ratio 2017 standard.” This matters because leverage limits a bank’s balance-sheet exposure relative to its capital, alongside risk-based capital rules.

The amendment sets minimum ratios of 4 per cent for domestic systemically important banks and 3.5 per cent for other banks. An Indian branch of a global systemically important bank must maintain 3.5 per cent plus its applicable G-SIB leverage buffer. The rules also establish capital-distribution consequences when a G-SIB branch misses required buffers or risk-based capital levels.

Banks must calculate capital and exposure measures at each quarter-end, unless the RBI approves more frequent calculations. They must meet the minimum leverage ratio at all times. The amended framework also clarifies regulatory consolidation and exposure-measurement principles.

The Basel III leverage ratio is a simple capital safeguard. It is defined as the capital measure, or numerator, divided by the exposure measure, or denominator, with the result expressed as a percentage. Unlike a risk-based ratio, this framework focuses on the relationship between capital and the bank’s measured exposures.

For example, if a bank’s capital measure were 4 units and its exposure measure were 100 units, its leverage ratio would be 4 per cent. The article does not specify a particular capital composition or a single accounting formula for the numerator. It does specify that the exposure measure generally follows gross accounting values, unless detailed rules provide otherwise.

The ratio matters because the RBI sets minimum percentages for different bank categories. Capital and exposure are calculated on a quarter-end basis, although the RBI may approve more frequent, consistently applied calculations. Banks must satisfy the minimum ratio at all times.

The RBI sets different minimum leverage ratios according to a bank’s systemic importance. A domestic systemically important bank, or D-SIB, must maintain a leverage ratio of 4 per cent. This is higher than the requirement for other banks because the amendment assigns it a distinct minimum.

Other banks must maintain at least 3.5 per cent. A branch in India of a global systemically important bank, called a G-SIB branch, must maintain 3.5 per cent plus the leverage-ratio buffer applicable to it as a G-SIB. That includes any additional leverage-ratio buffer prescribed by its home regulator.

These are minimum requirements, not target averages. The amendment says banks must meet the minimum leverage ratio at all times. Capital and exposure measures are generally calculated at quarter-end, unless the RBI approves more frequent calculations, such as daily or monthly averaging, applied consistently.

The RBI states that the amendment is needed to align its leverage-ratio framework with the latest standard issued by the Basel Committee on Banking Supervision. The specified benchmark is the “leverage ratio 2017 standard.” This gives the amendment a clear international regulatory reference.

The change applies to Chapter VII of the RBI’s Commercial Banks—Prudential Norms on Capital Adequacy Directions, 2025. Alignment matters because the leverage-ratio framework governs how banks define, measure, and limit leverage. The amendment therefore updates minimum ratios, consolidation rules, and exposure-measurement provisions within the RBI framework.

The article does not describe the earlier Indian rules in detail or identify individual differences from the Basel standard. It does state that the RBI considered amendment necessary and expedient in the public interest. The new instructions were issued under Section 35A of the Banking Regulation Act, 1949, and related enabling laws.

The amendment says the leverage-ratio exposure measure generally follows gross accounting values. It also says that, unless specified differently, a bank shall not take account of physical or financial collateral or net exposures. The supplied article ends before the full sentence and detailed exceptions appear.

The key mechanism is classification. A long-settlement transaction classified as a derivative uses the derivative-exposure rules in paragraphs 267 or 267A. A failed trade classified as a receivable uses on-balance-sheet rules in paragraph 266. Failed securities-financing transactions are handled separately under paragraph 268.

Using gross values makes the denominator less dependent on collateral or offsetting arrangements. That creates a broad, straightforward leverage check alongside risk-based capital ratios. The article states the measurement rule but does not fully explain its policy rationale. The framework applies the same regulatory-consolidation scope as the risk-based capital framework, under paragraph 263.

A G-SIB branch in India must satisfy both its leverage-ratio requirement and its risk-based capital requirements. The leverage requirement is a 3.5 per cent minimum plus the applicable G-SIB leverage buffer. The risk-based requirements include a 5.5 per cent minimum, a 2.5 per cent capital-conservation buffer, the G-SIB higher loss-absorbency requirement, and any applicable countercyclical buffer.

If the branch meets both requirements, it is not subject to minimum capital-conservation standards. If it misses one, it faces the associated minimum capital-conservation standard. If it misses both, it faces whichever standard is higher: the one linked to risk-based capital or the one linked to leverage.

The amendment specifically states that capital-distribution constraints apply when a G-SIB branch does not meet its leverage-ratio buffer requirement. The exact table values are not included in the supplied text, but the framework clearly links shortcomings to conservation requirements and limits on capital distribution.

Leverage limits and risk-based capital ratios protect against different weaknesses. A leverage ratio compares capital with a broad exposure measure. It does not depend primarily on assigning risk weights to each exposure. A risk-based ratio, by contrast, links required capital to the assessed risk of assets and activities.

For example, a bank might hold assets that appear low-risk under a risk-based calculation but still build a very large balance sheet. The leverage limit supplies a simple ceiling on that expansion. Conversely, risk-based ratios can require more capital when exposures are judged especially risky. The two measures therefore work as complementary safeguards.

The article applies both ideas to G-SIB branches. It lists CET1 risk-based requirements and a Tier 1 leverage requirement, then imposes the higher conservation standard when both are missed. The broader implication is a stronger capital cushion for depositors and the financial system, though the article does not quantify those effects.