The Reserve Bank of India (Small Finance Banks - Prudential Norms on Capital Adequacy) Fourth Amendment Directions, 2026 issued by the Reserve Bank of India revise the prudential norms relating to inclusion of quarterly profits in Common Equity Tier 1 (CET1) capital for Capital to Risk Weighted
Assets Ratio (CRAR) computation by Small Finance Banks. Under the amended framework, Small Finance Banks may recognise profits of the current financial year on a quarterly basis for CRAR calculation, subject to quarterly financial statements being audited or subjected to limited review. The
eligible profit to be included in CET1 capital is to be= calculated using a prescribed formula that adjusts net profit by deducting a proportionate amount based on the average dividend paid during the preceding three financial years. Further, the Directions clarify that cumulative net losses up to the relevant quarter end shall be fully deducted while calculating CET1 capital. The amendment has come into force
with immediate effect.
