The Reserve Bank of India (RBI) wants banks to become more transparent about their financial health. In a move aimed at giving customers, investors and market participants a clearer picture of how banks manage risks, the central bank has proposed new disclosure rules under Basel III norms.
If implemented, banks may soon have to publish more detailed information about their capital strength, liquidity position and risk exposure every quarter in a standard format.
On Tuesday, the RBI released a draft circular proposing a revised disclosure framework for banks under Basel Pillar 3 norms.
Under the proposal, banks will be required to publish more detailed information on important financial measures such as capital adequacy, leverage, liquidity and risks. The idea is to improve transparency and strengthen market discipline.
The central bank said lenders would need to make quarterly disclosures in a common format so that information becomes easier to compare across banks.
If the proposal comes into force, banks will have to disclose key financial 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).
In simple terms, these numbers help explain whether a bank has enough financial strength to absorb shocks, manage risks and meet its funding needs.
Banks will also need to explain major changes in these figures from one quarter to another and the reasons behind such movements.
The RBI has said banks should not just publish numbers but also explain the risks they face and how they deal with them.
According to the proposal, banks will need to describe their major business activities and significant risks, backed by relevant data and details.
If there are noticeable changes in risk exposure between reporting periods, banks will also have to explain what caused the shift and how management responded to it.
The central bank believes such disclosures will help people better understand a bank’s financial position rather than relying only on headline numbers.
The RBI has also proposed that banks create a dedicated ‘Regulatory Disclosure Section’ on their websites.
This section would contain all Pillar 3-related disclosures and be available for market participants to access easily. Banks may also have to maintain an archive of these reports for at least ten years so older records remain publicly available.
The central bank said Pillar 3 disclosures should be released alongside financial reports for the same period. If no financial report is issued for a particular period, banks should publish the required disclosures as soon as possible.
The RBI has also provided some flexibility in the draft proposal.
For example, if a bank believes certain information may not be useful for users because the exposure or risk amount is too small or not significant, it may skip some disclosures.
However, the bank will still have to clearly explain why it considers that information not meaningful for users.
The RBI has invited public comments on the draft circular until June 2.
Once finalised, the new disclosure rules are expected to come into effect from the quarter ending September 30, 2026.
For banks, this could mean more detailed reporting work. For customers and investors, however, it may bring greater clarity on how safely and efficiently banks are managing money and risks.