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Informist, Monday, May 18, 2026

 

--RBI: Not necessary for bks to activate counter-cyclical capital buffer 

 

MUMBAI – The Reserve Bank of India Monday said banks do not need to activate at this point in time the counter-cyclical capital buffer that they are required to maintain. The framework for activation envisages the credit-to-GDP ratio as the main indicator, which may be used in conjunction with other supplementary indicators, according to a release from the central bank. The decision to active the buffer would be announced in advance, the RBI said.

 

The counter-cyclical capital buffer, notified in February 2015, has not been activated since its introduction. The RBI has annually announced the review for requiring the buffer at the beginning of the financial year in April.

 

As per the 2015 guidelines issued by the RBI, the counter-cyclical capital buffer regime aims to make banks build up a buffer of capital in good times which may be used to maintain the flow of credit in difficult times. It would also achieve the broader macro-prudential goal of restricting the banking sector from indiscriminate lending in periods of excess credit growth that have often been associated with the building up of system-wide risk. The buffer is to be maintained in the form of common equity tier-I capital only, and the amount may be up to 2.5% of banks' total risk weighted assets.  End

 

Reported by J. Navya Sruthi

Edited by Rajeev Pai

 

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