RBI Proposes Enhanced Disclosure Framework for Banks Under Basel III

The Reserve Bank of India (RBI) on Tuesday proposed a revised disclosure framework under Basel III norms that would require banks to publish more detailed information on capital adequacy, leverage, liquidity and risk exposure, in a move aimed at strengthening transparency and market discipline, PTI reported.

Under the proposed framework, banks would be required to make quarterly disclosures in a standardised format covering key prudential indicators, including Common Equity Tier 1 (CET1) capital, total capital, risk-weighted assets (RWAs), leverage ratio, liquidity coverage ratio (LCR) and net stable funding ratio (NSFR).

According to a draft circular on Pillar 3 disclosure requirements, banks would also have to explain major changes in these metrics compared with previous quarters and identify factors driving such movements.

The RBI has invited stakeholder comments on the draft circular until June 2 and said the final directions would become effective from the quarter ending September 30, 2026.

The central bank said banks would be expected to provide disclosures describing their main activities and all significant risks, supported by relevant underlying information and data.

Significant changes in risk exposure between reporting periods should also be explained along with the management's response to such developments.

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

As part of the proposed changes, banks will also be required to maintain a dedicated "Regulatory Disclosure Section" on their websites where all disclosure-related information would be available for market participants.

Banks would need to maintain an archive of previous Pillar 3 reports on their websites for a minimum period of 10 years.

The RBI also proposed that banks publish Pillar 3 disclosures simultaneously with their financial statements for the corresponding period.

In cases where no financial report is issued, the disclosures should be published as soon as practicable.

The draft framework also provides flexibility in certain situations.

If a bank believes that information requested under a specific template or table is not meaningful for users because exposures and risk-weighted asset amounts are immaterial, it may choose not to disclose part or all of such information.

In such cases, banks would be required to provide a narrative explanation stating why the information is considered not meaningful for users.