RBI issues guidelines for banks to implement the Leverage Ratio 2017 standard
As part of efforts to update the capital adequacy framework in Indian banking regulation, the Reserve Bank has issued final amendment directions to implement the Leverage Ratio 2017 standard. These directions will take effect from 1 April 2027, while stakeholders were invited to comment on the draft rules by 28 August 2026.
Highlights
- RBI issues final amendment directions for banks to adopt the Leverage Ratio 2017 standard, after inviting public comments until 28 August 2026.
- Commercial banks must update their capital management and compliance reporting arrangements to meet the new leverage ratio rules before 1 April 2027.
- This regulatory step brings the Indian banking system closer to international Basel standards, strengthening risk management and operational processes.
This article was translated from the original. Read the original version by our correspondent here.
Final amendment directions and timeline
As stated in the press release from the Reserve Bank of India, the central bank issued the draft Reserve Bank of India (Commercial Banks, Prudential Norms on Capital Adequacy) Eleventh Amendment Directions, 2026, on 7 August 2026, proposing to adopt the latest leverage ratio framework issued by the Basel Committee on Banking Supervision, the Leverage Ratio 2017 standard. Stakeholders were invited to submit feedback on the draft by 28 August 2026.The central bank said that it had reviewed the responses received on the draft directions and incorporated appropriate amendments into the final directions based on them. A statement on the comments received is available in the annex.
Regulatory impact on the banking sector
With the issuance of the final amendment directions, an updated regulatory standard is being incorporated into the capital adequacy framework for commercial banks. Banks will need to update their compliance arrangements, capital management and internal reporting frameworks to align with the new rules before 1 April 2027.This step is intended to bring the Indian banking system closer to international Basel standards. Greater regulatory clarity will help banks plan the necessary changes to their operational and risk management processes in line with the implementation timeline.
Our previous report discussed the practice of ‘indirect evergreening’ at Indian banks, in which some banks with weak capital positions route funds through related parties to delay the recognition of bad loans and create the appearance of recovery. The article noted that such loans may be more prone to default and, because they can evade traditional supervision, investors and regulators need to examine links such as group structures and fund flows closely.
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