RBI allows banks to defer implementation of last tranche of capital conservation buffer by six months

Capital conservation buffer to rise to 2.5% by 30 September 2020 instead of 31 March 2020

The capital conservation buffer (CCB) is designed to ensure that banks build up capital buffers during normal times (i.e., outside periods of stress) which can be drawn down as losses are incurred during a stressed period.

As per Basel standards, the CCB was to be implemented in tranches of 0.625% and the transition to full CCB of 2.5% was set to be completed by 31 March 2019. It was subsequently decided to defer the implementation of the last tranche of 0.625% of the CCB from 31 March 2019 to 31 March 2020.

 

Considering the potential stress on account of COVID-19, it has been decided to further defer the implementation of the last tranche of 0.625% of the CCB from 31 March 2020 to 30 September 2020.

Consequently, the pre-specified trigger for loss absorption through conversion/write-down of Additional Tier 1 instruments (PNCPS and PDI) shall remain at 5.5% of risk-weighted assets (RWAs) and will rise to 6.125% of RWAs on 30 September 2020.

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