Reserve Bank of India retains 3.5% minimum leverage ratio for G-SIB branches, effective April 1, 2027

Key facts

• The Reserve Bank of India (RBI) issued final norms requiring global systemically important banks (G-SIBs) operating in India to maintain a minimum leverage ratio of 3.5% from April 1, 2027.
• RBI rejected banks' suggestions to align the requirement with the 3% minimum prescribed under the Basel framework and retained the higher 3.5% threshold.
• RBI also rejected stakeholder requests to extend the implementation timeline, retaining April 1, 2027 as the effective date.
• The final norms follow a draft proposal issued in August, during which banks had asked RBI to align with the 3% Basel minimum.
• The leverage ratio measures a bank's Tier 1 capital against its total exposure, serving as a safeguard against excessive borrowing.
• Under the final rules, banks failing to meet the prescribed ratio will face restrictions on capital distribution, including limits on repatriating profits.
• Per the amendment directions, the minimum leverage ratio is 4% for domestic systemically important banks (D-SIBs) and 3.5% for other banks, while G-SIB branches must maintain 3.5% plus the applicable G-SIB leverage ratio buffer.
• The amendment aligns India's leverage ratio framework with the Basel Committee on Banking Supervision's leverage ratio 2017 standard and amends the RBI (Commercial Banks – Prudential Norms on Capital Adequacy) Directions, 2025.