By Special Correspondent Arun Sharma, New Delhi/Mumbai

Mumbai: In a significant move aimed at strengthening the banking sector and easing capital pressures, the Reserve Bank of India (RBI) has proposed a series of measures to relax capital requirements, potentially unlocking tens of thousands of crores in additional liquidity.


Quarterly Profits Inclusion: Banks may soon be allowed to include quarterly profits in their capital calculations.


IFR Requirement Relaxation: The mandatory maintenance of the Investment Fluctuation Reserve (IFR) could be scrapped.
Liquidity Boost: Measures may release ₹35,000–₹40,000 crore into the banking system.


Improved Lending Capacity: Enhanced capital flexibility is expected to boost credit growth.


According to RBI’s proposal, these reforms are designed to enable banks to utilize their capital more efficiently while maintaining financial stability. Currently, banks are required to adhere to stringent Capital Adequacy Ratio (CAR) norms, including additional provisioning for non-performing assets (NPAs).


Sanjay Malhotra, Governor of the RBI, indicated that the proposed steps respond to long-standing demands from the banking sector. He emphasized that easing capital access would not only support banks but also reinforce overall financial system stability.


Why It Matters
Experts believe that if implemented, the proposals could significantly enhance banks’ ability to lend, thereby supporting economic growth amid ongoing global uncertainties and market volatility.


The central bank is expected to take a final decision after detailed consultations with stakeholders and a comprehensive review of the proposals.


Bottom Line: RBI’s reform push could mark a pivotal shift in capital management norms, offering timely relief to banks while sustaining economic momentum.