Leverage Ratio
The RBI relaxed leverage ratio to 4% for Domestic Systemically Important Banks (DSIBs) and 3.5% for other banks for moving towards synchronization with Basel III standards.
- Leverage Ratio is Tier I capital as a percentage of the bank’s exposure.
- Tier I capital consists of money kept as Statutory Liquidity Ratio (SLR), in physical cash form & as share capital and secured loans. At least 6% of CAR must come from Tier 1 capital. This capital can absorb losses without bank ceasing its trading operations.
- Leverage Ratio is one the four indicators under the RBI's Prompt Corrective Action (PCA) framework.
- It will expand banks’ lending ....
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