India Delays Implementation Of Capital Conservation Buffer By One Year

The RBI has announced the final tranche of the capital conservation buffer will be applicable from 31 March 2020 instead of 31 March 2019.

The RBI (Reserve Bank of India) has announced it will delay the implementation of the last tranche of the 0.625 percent Capital Conservation Buffer (CCB) by one year following an agreement at its board meeting in November.

The CCB is designed to ensure that banks build up capital buffers during normal times (outside periods of stress), which can be drawn down as losses are incurred during periods o f stress. Banks in India are required to maintain a CCB of 2.5 percent, comprising Common Equity Tier 1 (CET1) capital, above the regulatory minimum capital requirement of 9 percent.

The final tranche of the CCB will now come into effect on 31 March 2020. Minimum capital conservation ratios under the CCB Framework that were applicable from 31 March 2018 will also apply from 31 March 2019 until the CCB ratio of 2.5 percent is attained by 31 March 2020.

Pre-specified triggers for loss-absorption through conversion or write-down of additional tier 1 instruments will remain at 5.5 percent of risk-weighted assets, rising to 6.125 percent by 31 March 2020.

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