The Reserve Bank of India (RBI) on Friday announced that the revised leverage ratio framework for banks, based on standards issued by the Basel Committee on Banking Supervision, will come into effect from April 1, 2027.
Under the new guidelines for implementing the 'Leverage Ratio 2017 Standard', domestic systemically important banks (D-SIBs) will be required to maintain a minimum leverage ratio of 4 per cent, while other banks must maintain a ratio of at least 3.5 per cent.
The revised framework is aimed at strengthening the capital adequacy requirements of banks and ensuring that they maintain adequate capital relative to their overall exposures.
๐ฆ๐๐ฟ๐ถ๐ฐ๐๐ฒ๐ฟ ๐ป๐ผ๐ฟ๐บ๐ ๐ณ๐ผ๐ฟ ๐๐๐๐๐ฒ๐บ๐ถ๐ฐ ๐ฏ๐ฎ๐ป๐ธ๐
The RBI said branches of global systemically important banks (G-SIBs) operating in India will be required to maintain a leverage ratio of 3.5 per cent, along with the additional leverage ratio buffer applicable to them as G-SIBs.
This will include any supplementary leverage ratio buffer prescribed by the bank's home-country regulator.
"Capital distribution constraints will be imposed on a G-SIB branch which does not meet its leverage ratio buffer requirement," the guidelines stated.
The provision means that branches of globally significant banks failing to maintain the prescribed buffer could face restrictions on capital distributions.
The leverage ratio is a regulatory measure that compares a bank's Tier 1 capital with its total exposure, providing a safeguard against excessive borrowing and balance-sheet expansion.
Unlike risk-weighted capital adequacy ratios, the leverage ratio does not depend on assigning different risk weights to individual assets.
๐ฅ๐๐ ๐ฟ๐ฒ๐ท๐ฒ๐ฐ๐๐ ๐ฒ๐ ๐๐ฒ๐ป๐๐ถ๐ผ๐ป ๐ฟ๐ฒ๐พ๐๐ฒ๐๐
In August, the RBI had issued the draft Reserve Bank of India (Commercial Banks โ Prudential Norms on Capital Adequacy) Eleventh Amendment Directions, inviting comments and suggestions from stakeholders.
During the consultation process, several stakeholders requested additional time to transition to the revised leverage ratio framework.
However, the central bank declined to extend the implementation timeline.
"The effective date for implementation of the draft Amendment Directions was specified as April 1, 2027, aligning with the mandate for Basel III compliance, as stated in the Governor's statement dated October 1, 2025," the RBI said.
The central bank maintained that the implementation schedule had already been communicated and was consistent with its broader regulatory roadmap.
๐๐ฎ๐๐ฒ๐น ๐๐๐ ๐ฐ๐ผ๐บ๐ฝ๐น๐ถ๐ฎ๐ป๐ฐ๐ฒ ๐ฟ๐ผ๐ฎ๐ฑ๐บ๐ฎ๐ฝ
The revised leverage ratio requirements form part of the RBI's continuing efforts to align India's banking regulations with international prudential standards.
The Basel III framework was developed to strengthen the resilience of banks following vulnerabilities exposed during the global financial crisis.
Its leverage ratio requirements serve as an additional capital safeguard alongside risk-based capital adequacy norms.
By retaining the April 1, 2027, deadline, the RBI has given banks a defined timeline to prepare for the revised requirements.
The framework will apply different minimum leverage ratios depending on the systemic importance of banks, with additional buffer requirements for branches of global systemically important institutions.
Banks will be expected to comply with the revised norms from the notified implementation date.