Reserve Bank of India (RBI), through a circular dated September 29, 2025, has issued new directions to revise the eligible limit for including Perpetual Debt Instruments (PDIs) in the Additional Tier 1 (AT1) capital of all Scheduled Commercial Banks (excluding SFBs, PBs, and RRBs). This change, effective from October 1, 2025, supersedes the previous circular from October 4, 2021. Under the new Basel III Capital Regulations, PDIs issued in foreign currency or as rupee-denominated bonds overseas will now be eligible for inclusion in AT1 capital up to a maximum amount of 1.5 per cent of Risk Weighted Assets (RWAs), based on the latest available financial statements. This revision is an exercise of the RBI’s power under Section 35A of the Banking Regulation Act, 1949, intended to streamline capital regulations for banks.
RESERVE BANK OF INDIA
Reserve Bank of India (Basel III Capital Regulations – Perpetual Debt Instruments (PDI) in Additional Tier 1 Capital – Eligible Limit for Instruments Denominated in Foreign Currency/Rupee Denominated Bonds Overseas) Directions, 2025
RBI/2025-26/85
DOR.CAP.REC.No.53/21.01.002/2025-26|Dated: September 29, 2025
All Scheduled Commercial Banks
(Excluding Small Finance Banks, Payments Banks
and Regional Rural Banks)
Reserve Bank of India (Basel III Capital Regulations – Perpetual Debt Instruments (PDI) in Additional Tier 1 Capital – Eligible Limit for Instruments Denominated in Foreign Currency/Rupee Denominated Bonds Overseas) Directions, 2025
The Reserve Bank had issued a circular DOR.CAP.REC.No.56/21.06.201/2021-22 dated October 4, 2021 on “Basel III Capital Regulations – Perpetual Debt Instruments (PDI) in Additional Tier 1 Capital – Eligible Limit for Instruments Denominated in Foreign Currency/Rupee Denominated Bonds Overseas” (hereinafter referred to as “the circular”). On a review, it has been decided to revise the existing eligible limit applicable to PDIs denominated in foreign currency/rupee denominated bonds overseas.
2. Accordingly, in exercise of the powers conferred by section 35A of the Banking Regulation Act, 1949 and all other laws enabling the Reserve Bank in this regard, the Reserve Bank being satisfied that it is necessary and expedient in the public interest to do so, hereby issues the Directions hereinafter specified.
3. (i) These Directions shall be called the “Reserve Bank of India (Basel III Capital Regulations – Perpetual Debt Instruments (PDI) in Additional Tier 1 Capital – Eligible Limit for Instruments Denominated in Foreign Currency/Rupee Denominated Bonds Overseas) Directions, 2025”.
(ii) These Directions shall come into force from October 01, 2025.
4. In supersession of the circular ibid, the revised limits applicable to PDIs denominated in foreign currency/rupee denominated bonds overseas shall be as under:
“Perpetual Debt Instruments (PDIs) issued in foreign currency/ rupee denominated bonds overseas shall be eligible for inclusion in Additional Tier 1 (AT1) capital up to a maximum amount of 1.5 per cent of Risk Weighted Assets (RWAs) as per the latest available financial statements (audited or subjected to limited review).”
5. The circular DOR.CAP.REC.No.56/21.06.201/2021-22 dated October 4, 2021on “Basel III Capital Regulations – Perpetual Debt Instruments (PDI) in Additional Tier 1 Capital – Eligible Limit for Instruments Denominated in Foreign Currency/Rupee Denominated Bonds Overseas” shall stand repealed.
(Usha Janakiraman)
Chief General Manager-in-Charge
