For all other commercial banks in India, the minimum required leverage ratio is proposed to be at 3.5% as earlier, RBI said in a draft prudential norm on capital adequacy.
Also Read: RBI gives banks more time to implement bulk deposit rate norms, deadline now Oct 1
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, RBI said, inviting comments till August 28.
According to Basel-III standard, the leverage ratio is a bank’s tier 1 capital divided by its total exposure. The framework captures banks’ leverage position in respect of both on- and off-balance sheet exposures.
Also Read: RBI proposes banks to disclose detailed information on capital, risks under Basel Pillar 3RBI has prescribed that a bank should 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,” RBI said.