Reserve Bank Of India Releases Draft Basel Pillar 3 Disclosure Norms

New Delhi, May 20 (KNN) Reserve Bank of India (RBI) on Tuesday released draft norms on commercial banks’ capital adequacy disclosures under the Basel Pillar 3 framework, aimed at improving transparency, reducing information asymmetry, and enhancing comparability of banks’ risk profiles.

The central bank said the revised framework seeks to align India’s disclosure standards more closely with global Basel Pillar 3 requirements, which are designed to strengthen market discipline through enhanced regulatory disclosures.

“Pillar 3 of the Basel Framework aims to promote market discipline through regulatory disclosure requirements,” RBI said, adding that such disclosures help market participants assess a bank’s regulatory capital, risk exposures, and overall capital adequacy.

Draft Framework Expands Disclosure Responsibilities 

Under the proposed framework, Pillar 3 disclosure requirements will apply at the top consolidated level of the banking group where capital adequacy norms are applicable, reported Business Standard.

In cases where a bank is not the top consolidated entity within a banking group, disclosures will need to be made on a standalone basis.

The draft norms clarified that the requirements will also apply to unlisted entities even if they are not otherwise required to publish financial statements.

RBI has proposed that banks must establish a formal disclosure policy for Pillar 3 data, approved by the board of directors, outlining internal controls and procedures governing disclosures.

RBI Stresses Stronger Governance, Transparency Standards 

“The board of directors and senior management shall be responsible for establishing and maintaining an effective internal control structure over the disclosure of financial information, including Pillar 3 disclosures,” the draft said.

Additionally, one or more whole-time directors will be required to certify in writing that the disclosures have been prepared in accordance with the board-approved internal control processes.

The regulator noted that while transparency remains critical, banks may withhold certain proprietary or confidential information in exceptional cases where disclosure could contravene legal obligations.

However, banks will still need to provide broader information about the relevant subject and explain why specific details have not been disclosed. RBI further emphasised that Pillar 3 disclosures should be clear, meaningful, comprehensive, and easily understandable to stakeholders.

The disclosures should adequately describe banks’ key activities, major risk exposures, and risk management practices, supported by relevant data and consistent reporting standards.

The draft norms also stated that disclosures should remain comparable across banks and consistent over time. Banks have been directed to publish Pillar 3 disclosures simultaneously with their financial reports for the corresponding reporting period.

(KNN Bureau)