meta_id 3139582

On May 8, 2026, the Reserve Bank of India (RBI) issued the Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Fifth Amendment Directions, 2026. The amendment modifies provisions relating to the inclusion of quarterly profits in Common Equity Tier 1 (CET1) capital for commercial banks. The amendment revises Paragraph 12(x) of the Master Direction issued on November 28, 2025, establishing a new framework for banks to reckon current financial year profits for capital adequacy ratio (CRAR) calculations on a quarterly basis. Under the revised framework, banks must meet two conditions: financial statements must be audited or subjected to limited review on a quarterly basis, and the eligible profit amount must be calculated using a specified formula. The formula deducts 25 percent of the average dividend paid during the last three financial years from net profit up to each quarter. Additionally, cumulative net losses up to quarter end must be fully deducted when calculating CET1 capital for the relevant quarter. This approach aims to provide greater flexibility in capital calculations while maintaining prudential safeguards through dividend-based adjustments and loss deductions. The amendment applies to all commercial banks regulated by the RBI and comes into force with immediate effect. The directions are issued under Section 35A of the Banking Regulation Act, 1949, and related enabling provisions. REFERENCES: Reserve Bank of India. (2026). Reserve Bank of India (Commercial Banks – Prudential Norms on Capital Adequacy) Fifth Amendment Directions, 2026. RBI/2026-27/79 DOR.CAP.REC.No.68/21.01.002/2026-27.