The Reserve Bank of India (RBI) on Friday issued its final directions for how commercial banks must calculate and maintain their leverage ratio, aligning India's framework with the Basel Committee on Banking Supervision's Leverage Ratio 2017 standard. The rules, issued as the Eleventh Amendment Directions, 2026 to the RBI's capital adequacy norms, will take effect from April 1, 2027.

Source: The Hindu BusinessLine

Under the framework, domestic systemically important banks (D-SIBs) must maintain a minimum leverage ratio of 4 per cent, while other domestic commercial banks must maintain 3.5 per cent. Indian branches of global systemically important banks (G-SIBs) must maintain 3.5 per cent plus any applicable G-SIB leverage ratio buffer prescribed by their home regulators, Reuters reported.

Source: Reuters via TradingView

The leverage ratio is a bank's capital measure divided by its total exposure measure, expressed as a percentage. The total exposure covers on-balance sheet exposures, derivative exposures, securities financing transaction exposures and off-balance sheet items, the RBI framework says.

What changes for banks

The central bank has also specified explicit capital distribution constraints for G-SIB branches that fail to meet their leverage ratio buffer requirements, with the constraints depending on the branch's common equity tier 1 ratio and its leverage ratio. Banks will need to update their compliance, capital management and reporting arrangements before the April 2027 start date.

The final directions follow a draft framework the RBI released on August 7, 2026, inviting comments until August 28, 2026. The RBI had said the draft amendment endeavoured to implement the latest Basel leverage ratio framework.

Source: Reserve Bank of India