RBI proposes a leverage ratio of 3.5% for ‘important’ global banks
Kolkata, Aug 8, 2026
Synopsis
The Reserve Bank of India has proposed new leverage ratio requirements for banks. Globally systemic important banks will face a minimum 3.5% ratio plus a buffer. Domestic systemically important banks will continue with their 4% ratio mandate. Other commercial banks will maintain the existing 3.5% leverage ratio. These proposals align with the Basel Committee on Banking Supervision's framework.
The Reserve Bank of India (RBI) has proposed a minimum 3.5% leverage ratio plus an applicable buffer for branches of globally systemic important banks (G-SIB) in the country. The three domestic systemically important lenders - State Bank of India (SBI), HDFC Bank and ICICI Bank - will have to maintain the same ratio at 4%, showed the draft rules.
According to Basel-III standards, the leverage ratio is a bank’s tier 1 capital divided by its total exposure, and includes both balance sheet and off-balance sheet items for the lender. A higher ratio indicates higher own capital relative to the loaned funds, and is a measure of prudent capital adequacy.
The minimum core capital requirement under Basel norms is 3%.
The RBI proposed Friday that all other commercial banks in India, barring the three systemically important domestic lenders, are required to maintain a minimum leverage ratio of 3.5% as earlier.
The draft guideline said that 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 risk-based ratio and its leverage ratio.
The proposals are according to the latest leverage ratio framework issued by the Basel Committee on Banking Supervision, the RBI said, inviting comments until August 28.
The RBI has prescribed that a bank include all balance sheet assets in its leverage ratio exposure measure, including on-balance sheet derivatives collateral.
Meanwhile, the central bank said it may temporarily exempt banks’ balance maintained with it from the leverage ratio exposure measure in exceptional macroeconomic circumstances, to facilitate the implementation of monetary policies.
“In addition, in order to maintain the comparability and transparency of the leverage ratio framework, a bank shall be required to disclose the impact of any temporary exemption alongside ongoing public disclosure of the leverage ratio without application of such exemption,” the RBI said.
[The Economic Times]
