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

Mumbai: The Reserve Bank 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 March 31, 2019 to March 31, 2020," the RBI said in a notification.

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

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

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