BackRBI announces framework for banks’ countercyclical capital buffer
The move is aimed at ensuring streamlined flow of credit in times of stress
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Mumbai: The Reserve Bank of India (RBI) on Thursday released its framework for a countercyclical capital buffer (CCCB) for banks, stating that banks should maintain an extra 2.5% of their assets as capital over the mandatory requirement of 9%. Banks can use this extra capital to lend to the productive sector in times of difficulty.
The buffer is not required to be maintained by banks right now, but only when the RBI tells them to do so, the central bank said in a statement. The mandate for maintaining the buffer would be normally communicated by the central bank four quarters in advance, the statement said.
“For all banks operating in India, CCCB shall be maintained on a solo basis as well as on consolidated basis," the statement said, adding both foreign and domestic banks should maintain capital for Indian operations under the CCCB framework based on their exposures in India.
A working group, headed by RBI executive director B. Mahapatra, had suggested on the framework guidelines in July 2014. Under Basel III international guidelines on capital use, CCCB is compulsory for banks.
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