Not activating countercyclical capital buffer, says RBI
As per the counter-cyclical capital buffer (CCyB) framework laid out in the RBI (Commercial Banks – Precautionary Norms on Capital Adequacy) Guidelines, 2025, the CCyB will be activated when circumstances warrant and the decision will normally be announced in advance.
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The framework envisages the credit-GDP gap as the main indicator that can be used together with other complementary indicators.
“Based on review and empirical analysis of CCyB indicators, it has been decided that it is not necessary to activate CCyB at this juncture,” the RBI said in a statement. he said.
According to the apex bank, the purpose of the CCCB regime is twofold.
First, it requires a bank to establish a capital buffer that can be used in good times to keep credit flowing to the real sector in difficult times. Second, it achieves the broader macroprudential goal of restricting indiscriminate lending by the banking sector during periods of excessive credit growth, which is often associated with the build-up of system-wide risk.
Against the background of the 2008 global financial crisis, the Group of Central Bank Governors and Heads of Supervision (GHOS), the supervisory body of the standards set by the Basel Committee, envisaged the introduction of a framework for countercyclical capital measures.
