RBI amends bank leverage ratio rules: 4% for D-SIBs, 3.5% for other banks

What has changed

The RBI has amended Chapter VII (Leverage Ratio framework) of its Commercial Banks – Prudential Norms on Capital Adequacy Directions, 2025. The definition, minimum requirement and scope of the leverage ratio have now been set out afresh. According to the RBI, the change was needed to align with the ‘leverage ratio 2017 standard’ issued by the Basel Committee on Banking Supervision.

What the leverage ratio is

As per the RBI, the leverage ratio is a bank’s capital measure divided by its exposure measure, expressed as a percentage. In simple terms, it is a way of seeing how much capital a bank holds against the business it does.

Which bank must keep how much

Under the amended rule, the minimum leverage ratio for a domestic systemically important bank (D-SIB) is 4 per cent, while for other banks it is 3.5 per cent. A branch in India of a global systemically important bank (G-SIB) must keep 3.5 per cent plus the G-SIB leverage ratio buffer applicable to it, including any additional buffer set by its home regulator.

What it means for a G-SIB branch

A G-SIB branch that does not meet its leverage ratio buffer will face capital distribution constraints. The RBI said these constraints will depend on the branch’s CET1 risk-based ratio and its leverage ratio. A branch meeting both requirements will not face minimum capital conservation standards; one missing a single requirement will face the related standard; and one missing both will face the stricter of the two.

What it means for ordinary people

This direction does not directly concern ordinary depositors, account holders or borrowers. It sets no date or condition that an ordinary citizen must act on. It is a technical rule on banks’ capital framework, which the RBI describes as being in the public interest.