The RBI issued the Eleventh Amendment Directions, 2026, aligning the leverage ratio framework for commercial banks with the 'Leverage Ratio 2017 Standard' under global Basel norms, enhancing systemic resilience.
RBI Aligns Leverage Ratio with Basel Standards
On October 23, 2026, the Reserve Bank of India issued the Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Eleventh Amendment Directions, 2026 (RBI/2026-27/297), focusing on Chapter VII—Leverage Ratio Framework—of the existing Directions, 2025. The amendment ensures alignment of India’s prudential norms with the 'Leverage Ratio 2017 Standard' under the Basel III reforms, aimed at enhancing financial stability by limiting excessive leverage in banking institutions.
Under the revised framework, banks must maintain a minimum leverage ratio of 3%, calculated as Tier 1 Capital to total exposure (including on- and off-balance-sheet items). The update introduces adjustments to exposure measures, particularly for derivative exposures, repos, and securities financing transactions, to prevent regulatory arbitrage. The RBI emphasized that these standards are critical to mitigating systemic risk, especially in the context of interconnected global financial markets.
Banking lawyers and compliance officers must review internal capital reporting systems and exposure calculations to ensure compliance. The amendment underscores the RBI’s commitment to adopting international best practices in banking supervision, supporting macroprudential governance and investor confidence in India’s banking sector.
Citations
- Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Directions, 2025
- Basel III Leverage Ratio 2017 Standard
