RBI proposes allowing banks to include PAT in computing capital adequacy ratio
This story was originally published at 18:58 IST on 8 April 2026
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--RBI releases draft to review including PAT in bks' capital adequacy ratio
NEW DELHI – In draft norms released Wednesday, the Reserve Bank of India said it plans to allow banks to include quarterly profits in their capital-to-risk-weighted assets ratio, or CRAR, calculation, irrespective of provisioning levels, allowing banks to bolster their capital and improve lending. The central bank has invited stakeholders' comments on the draft norms till Apr. 29.
"The guidelines regarding the change in the calculation of CRAR are a better reflection of the capital that banks have," RBI Governor Sanjay Malhotra had said earlier in the day.
Till now, commercial banks could include their profits in CRAR calculation every quarter, provided the incremental provisions made for non-performing assets at the end of any of the four quarters of the previous financial year did not deviate more than 25% from the average of the four quarters. "Based on a review, it has been decided to do away with this qualifying condition of incremental provisions for NPAs," the central bank said.
"This proposal gives considerable flexibility to banks to internal plough back," State Bank of India Group Chief Economic Adviser Soumya Kanti Ghosh said in a note.
According to the draft norms, in order to include profits in a bank's capital adequacy ratio calculation, the financial statements for the quarter must be subjected to review or audit by the statutory auditors. If the bank has a cumulative net loss up to the quarter-end, the full amount of the loss must be deducted from the common equity tier 1 capital, and banks must also deduct average dividends paid in the previous three financial years while calculating the profit to be added to the capital, the central bank said. End
Reported by Priyasmita Dutta
Edited by Tanima Banerjee
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