RBI defers capital buffer norms by a year; leaves Rs 37,000 cr in hands of banks

Mumbai: The Reserve Bank on Thursday deferred the implementation of the last tranche of Capital Conservation Buffer (CCB) by a year, a move that would leave about estimated Rs 37,000 crore capital in the hands of banks.

This would help banks increase lending by over Rs 3.5 lakh crore by leveraging ten times of the capital.

“It has been decided to defer the implementation of the last tranche of 0.625 percent of CCB from 31 March, 2019 to 31 March, 2020,” the RBI said in a notification.

Accordingly, minimum capital conservation ratios of 2.5 percent would be applicable from on 31 March, 2020.

Currently, the CCB of banks stands at 1.875 percent of the core capital.

The CCB is the capital buffer that banks have to accumulate in normal times to be used for offsetting losses during periods of stress. It was introduced after the 2008 global financial crisis to improve the ability of banks to withstand adverse economic conditions.

Further, it said, the pre-specified trigger for loss absorption through conversion or write-down of additional tier 1 instruments will remain at 5.5 percent of risk-weighted asset (RWA) and will rise to 6.125 percent of RWAs on 31 March, 2020.

The decision to defer CCB was taken in 19 November crucial meeting of central board of directors.

The Board, however, decided to retain the capital adequacy ratio or CRAR at 9 percent.

To keep watching India’s No. 1 English Business News Channel – CNBC-TV18, call your Cable or DTH Operator and ask for the Colors Family Pack (inclusive of 24 channels), available for Rs. 35/- per month, or subscribe to the channel for Rs. 4/- per day.

To keep watching the Leader in Global Market & Business News – CNBC-TV18 Prime HD, call your Cable or DTH Operator and ask for the Colors Family HD Pack (inclusive of 25 channels), available for Rs. 50/- per month, or subscribe to the channel for Rs. 1/- per day.