Reserve Bank of India (RBI) proposed a minimum of 11.5% capital for four all India financial institutions (AIFI).

Key Facts

• This minimum capital was proposed in accordance with Basel III framework for raising the resilience of AIFI in periods of stress.
• Stricter capital norms would be applicable to National Housing Bank, Exim Bank, Small Industries Development Bank of India and National Bank for Agriculture & Rural Development from the fiscal year 2022.
• As per RBI, these institutions should have a minimum total capital at 9% from April 1, 2022 as well as a minimum capital buffer at 2.5%.
• Minimum common equity tier 1 (CET1) capital of these institutions would be 5.5% on the other hand, minimum tier 1 capital requirement has been proposed at 7%.
• These entities are required to adopt standardized approaches for measurement of capital charge for market risk and credit risk.
• RBI also proposes that, the insurance and non-financial subsidiaries, joint ventures or associates of AIFI, with 10% of common share capital, should not be consolidated for capital adequacy.