RBI proposes extra leverage buffer for G-SIB branches in India
RBI draft rules require G-SIB branches in India to hold a 3.5% leverage ratio plus parent-bank buffer, aligning with Basel 2017 standards.
The Reserve Bank of India has floated draft rules that would require Indian branches of global systemically important banks (G-SIBs) to hold an additional leverage ratio buffer, bringing domestic capital norms in line with the latest Basel Committee standards.
Under the proposed framework, a G-SIB branch operating in India must maintain a minimum leverage ratio of 3.5 per cent, on top of the buffer applicable to its parent bank, including any extra requirement set by the home regulator. The leverage ratio, which compares Tier 1 capital with total exposure, is designed to curb excessive borrowing and leverage build-up.
The RBI has kept the existing minimum leverage ratio unchanged at 4 per cent for domestic systemically important banks (D-SIBs) and 3.5 per cent for other banks.
The draft also proposes curbs on capital distributions by a G-SIB branch that fails to meet its leverage ratio buffer requirement. The severity of these restrictions would depend on whether the branch satisfies its Common Equity Tier 1 risk-based capital and leverage ratio requirements.
These changes are part of the draft Reserve Bank of India (Commercial Banks - Prudential Norms on Capital Adequacy) Eleventh Amendment Directions, 2026. The RBI said the amendments aim to align with the Basel Committee's "Leverage Ratio 2017 Standard".
The draft revises how banks calculate overall leverage exposure, covering on-balance-sheet assets, derivatives, securities financing transactions and off-balance-sheet items. For derivatives, exposure would generally be calculated at 1.4 times the sum of replacement cost and potential future exposure, subject to netting and other conditions.
The RBI also wants to prevent banks from using structures that understate actual leverage. In such cases, supervisory action could include extra reporting or a Pillar 2 capital charge. In exceptional macroeconomic conditions, the central bank may temporarily exclude balances held with it from the exposure measure, but would raise the minimum ratio correspondingly to preserve resilience.
Banks must continue to disclose Basel III leverage ratios quarterly on standalone and consolidated bases, and report detailed capital and exposure data to the RBI.
The proposed norms are scheduled to take effect from April 1, 2027. The RBI has invited comments on the draft until August 28, 2026.