.png "The Reserve Bank of India has amended the prudential norms related to capital adequacy")
- The RBI introduced a new dividend payout cap, allowing banks to pay up to 75% of PAT, but only if their CET1 capital remains above minimum requirements.
- It revised Counterparty Credit Risk (CCR) rules, updating add‑on factors for Potential Future Exposure and applying a 2% risk weight for clearing members, while clarifying “precious metals” as silver, platinum, and palladium.
- For NBFCs, quarterly profits can now be included in Tier‑1 capital if audited, but reduced by the average dividend paid over the past three years.
- Foreign bank subsidiaries (WOS) were also brought under the same prudential dividend rules as domestic banks, ensuring competitive neutrality.
- Together, these changes strengthen risk management, transparency, and shareholder discipline, reinforcing India’s commitment to global financial stability.
Question:
Q.1 The Reserve Bank of India (RBI) allows dividend payouts up to 75% of Profit After Tax (PAT) only if which condition is met regarding Common Equity Tier 1 (CET1)?a) CET1 equals minimum requirement
b) CET1 is below requirement
c) CET1 is above minimum requirement
d) CET1 is not considered
Answer: c) Banks must maintain Common Equity Tier 1 (CET1) above regulatory minimum levels.
