The Reserve Bank of India issued the Reserve Bank of India (Payments Banks – Prudential Norms on Capital Adequacy) Second Amendment Directions, 2026, with immediate effect to amend provisions relating to inclusion of quarterly profits in Common Equity Tier 1 (CET1) capital for Payments Banks. The amendment revises paragraph 9(x) of the Master Direction issued on November 28, 2025. Under the revised framework, Payments Banks may recognize profits in the current financial year for Capital to Risk Weighted Assets Ratio (CRAR) calculations on a quarterly basis, subject to audited or limited reviewed quarterly financial statements. The eligible profit amount is to be calculated using a prescribed formula that deducts 25% of the average dividend paid during the previous three financial years from the net profit up to the relevant quarter. The amendment further mandates that cumulative net losses up to the quarter-end must be fully deducted while computing CET1 capital for the respective quarter. The RBI stated that the amendment was introduced following a regulatory review and in public interest under powers conferred by Section 35A of the Banking Regulation Act, 1949.
Reserve Bank of India
RBI/2026-27/81
DOR.CAP.REC.No.70/21.01.002/2026-27 | Dated: May 08, 2026
Reserve Bank of India (Payments Banks – Prudential Norms on Capital Adequacy) Second Amendment Directions, 2026
The Reserve Bank had issued the Reserve Bank of India (Payments Banks – Prudential Norms on Capital Adequacy) Directions, 2025 (hereinafter referred as the ‘Master Direction’), on November 28, 2025, as amended from time to time. Based on a review, it is proposed to amend the provision relating to inclusion of quarterly profits in Common Equity Tier 1 (CET1) capital by a Payments Bank.
2. Accordingly, in exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949 and all other provisions / laws enabling the Reserve Bank of India in this regard, the Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Amendment Directions hereinafter specified.
3. These instructions shall be called the Reserve Bank of India (Payments Banks – Prudential Norms on Capital Adequacy) Second Amendment Directions, 2026.
4. These Directions shall come into force with immediate effect.
5. These Amendment Directions modify the Master Direction as under:
Paragraph 9(x) shall be replaced by:
“(x) A bank may reckon the profits in current financial year for CRAR calculation on a quarterly basis subject to the following conditions:
(a) The financial statements shall be audited or subjected to limited review on a quarterly basis; and
(b) The amount which can be reckoned shall be arrived at by using the following formula:
EPt = NPt – 0.25 *D*t
Where:
EPt = Eligible profit up to quarter ‘t’ of the current financial year, t varies from 1 to 4
NPt = Net profit up to quarter ‘t’
D = average dividend paid during the last three financial years
The cumulative net loss up to the quarter end shall be fully deducted while calculating CET1 capital for the relevant quarter;”
Yours faithfully,
(Sunil T S Nair)
Chief General Manager
