Mumbai: The Reserve Bank of India on Thursday deferred the implementation of the last tranche of the capital conservation buffer (CCB) by a year, a move that would leave about an estimated 37,000 crore in the hands of banks. This would help banks increase lending by over 3.5 lakh crore.

“It has been decided to defer the implementation of the last tranche of 0.625 per cent of CCB from March 31, 2019 to March 31, 2020," the RBI said in a notification. Accordingly, the minimum capital conservation ratios of 2.5% will be applicable from on 31 March 2020.

At present, the CCB of banks stands at 1.875% of the core capital. The CCB is the capital buffer that banks have to accumulate in normal times and use it to offset 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% of risk-weighted asset (RWA) and will rise to 6.125% of RWAs on March 31, 2020.

The decision to defer the CCB was taken during a crucial meeting of the central bank’s board of directors in November. The board, however, decided to retain the capital adequacy ratio or CRAR at 9%.

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