October 26, 2021
All Local Area Banks
Dear Sir / Madam,
The Reserve Bank of India has, from time to time, issued several guidelines / instructions / directives to Local Area Banks on Prudential Norms on Capital Adequacy.
2. To enable Local Area Banks to have current instructions at one place, a Master Direction, incorporating all the existing guidelines / instructions / directives on the subject, has been prepared for reference of the banks.
3. This Direction has been issued by RBI in exercise of its powers conferred under Section 35A of the Banking Regulation Act 1949 and in exercise of all the powers enabling it in this behalf.
Yours faithfully,
(Usha Janakiraman)
Chief General Manager
October 26, 2021
Reserve Bank of India – Prudential Norms on Capital Adequacy for
Local Area Banks, Directions, 2021
In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949, the Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified.
CHAPTER – I
PRELIMINARY
1. Short Title and Commencement.
(a) These Directions shall be called the Reserve Bank of India (Prudential Norms on Capital Adequacy for Local Area Banks) Directions, 2021.
(b) These directions shall come into effect from October 26, 2021.
2. Applicability
The provisions of these Directions shall apply to all Local Area Banks, licensed to operate in India by the Reserve Bank of India.
3. Purpose
This Master Direction covers instructions regarding the components of capital and the capital required to be provided for by banks for credit and market risks. These Directions serve to specify the prudential norms from the point of view of capital adequacy. Permission for LABs to undertake transactions in specific instruments/products shall be guided by the regulations, instructions and guidelines on the same issued by Reserve Bank from time to time.
4. Definitions
(a) In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below —
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