RBI Proposes Banks to Disclose Detailed Information on Capital, Risks Under Basel Pillar 3

The Reserve Bank on Tuesday proposed a revised disclosure framework for banks under Basel III norms, requiring lenders to disclose and publish more granular information on capital adequacy, leverage, liquidity and risk exposure to improve transparency and market discipline.

The central bank said banks will have to make quarterly disclosures in a uniform format covering key prudential metrics, such as Common Equity Tier 1 (CET 1) capital, total capital, risk-weighted assets (RWAs), leverage ratio, liquidity coverage ratio (LCR) and net stable funding ratio (NSFR).

In a draft circular on Pillar 3 disclosure requirements, banks will also have to explain significant changes in these metrics from previous quarters and key drivers behind such movements.

The Reserve Bank of India (RBI) has invited comments on the draft circular by June 2, and also announced that the final directions would come into effect from the quarter ended September 30, 2026.

The RBI proposes disclosures that describe a bank's main activities and all significant risks, supported by relevant underlying data and information.

Significant changes in risk exposures between reporting periods should be described, along with management's appropriate response.

Banks are expected to provide sufficient information in both qualitative and quantitative terms on their processes and procedures for identifying, measuring, and managing those risks, an RBI release said.

According to the draft circular, banks must maintain a 'Regulatory Disclosure Section' on their websites, where all information relating to disclosures shall be made available to market participants. Further, banks must also make available on their website an archive of Pillar 3 reports relating to prior reporting periods for at least ten years.

A bank must publish Pillar 3 disclosures concurrently with its financial reports for the corresponding period. If a Pillar 3 disclosure is required for a period when a bank does not produce any financial report, the disclosure requirement shall be published as soon as practicable, the RBI said.

However, the draft circular also made certain exceptions, like if a bank considers that the information requested in a template or table would not be meaningful to users, for example, because the exposures and risk-weighted asset (RWA) amounts are deemed immaterial, it may choose not to disclose part, or all of the information requested. The bank has to explain in a narrative commentary why it considers such information not to be meaningful to users.