RBI removes NPA-provisioning test for CET1 profit inclusion
Bank capital teams must remove the 25% NPA-provisioning gate from CET1 logic
Change
The Reserve Bank of India issued three Amendment Directions removing the 25% incremental NPA-provisioning deviation condition for including current-year quarterly profits in CET1 capital for CRAR computation.
Why it matters
The amendment changes the computation rule banks use when deciding whether current-year quarterly profits can be reckoned in CET1 capital. Commercial banks, small finance banks and payments banks must align CRAR calculation logic, review checks and supporting working papers with the amended condition set rather than the deleted NPA-provisioning gate.
Implications
- — Regulatory capital reporting teams must remove the 25% incremental NPA-provisioning deviation gate from CET1 quarterly-profit inclusion logic — the deleted condition can no longer decide whether current-year quarterly profits are reckoned in CRAR.
- — Bank finance and treasury teams must update CRAR calculation models and CET1 forecasting templates — quarterly profit recognition can no longer be blocked by the removed NPA-provisioning deviation condition.
- — Capital adequacy review owners must update maker-checker checks, CRAR working papers and sign-off notes by bank category — commercial banks, small finance banks and payments banks now rely on separate 2026 Amendment Directions.
Who is affected
- — Regulatory capital reporting teams at commercial banks, small finance banks and payments banks
- — Bank finance and treasury teams maintaining CET1 and CRAR models
- — Capital adequacy review owners responsible for CRAR working papers and sign-off checks