The Reserve Bank of India has allowed banks to include profits earned during a financial year in their core capital on a quarterly basis, subject to certain conditions, in a bid to align capital adequacy computation with current financial performance while retaining prudential safeguards.
As per the Reserve Bank of India (Commercial Banks - Prudential Norms on Capital Adequacy) Fifth Amendment Directions, 2026, banks need to ensure that quarterly financial statements are either fully audited or subjected to a limited review before profits can be considered for regulatory capital purposes.
The RBI has also prescribed a revised formula for determining “eligible profit” that can be included in CET1 capital.
The Amendment is likely to provide banks greater flexibility in recognising interim profits for capital adequacy purposes, while ensuring that dividend expectations and potential losses are adequately factored into regulatory capital calculations.
Published on May 8, 2026