The Reserve Bank of India proposes to relax bank capital adequacy requirements

The original purpose of establishing this reserve mechanism was to help banks hedge against the risk of investment asset devaluation. The Governor of the Reserve Bank of India, Shaktikanta Das, stated in a monetary policy speech in Mumbai: "In view of the evolution of the prudent regulatory framework over the years, it is now proposed to do away with... the additional buffer requirement of the investment fluctuation reserve." The Reserve Bank of India also proposed easing related rules by allowing banks to use quarterly profit data to calculate the capital adequacy ratio. This ratio is a key financial indicator of a bank's capital strength and is used to assess a bank's level of capital adequacy relative to risk-weighted assets that include non-performing loans.