Countercyclical Capital Buffer (CCyB)

The Reserve Bank of India (RBI) has decided not to activate the countercyclical capital buffer (CCyB).

• According to RBI the current economic conditions do not warrant the activation of this measure.

About Countercyclical Capital Buffer (CCyB)

• Genesis The framework for CCyB was introduced in the aftermath of the 2008 global financial crisis, as part of international financial stability measures endorsed by the Basel Committee.
  • RBI introduced in  February 2015 under Basel III.
• Purpose: The CCyB is a regulatory tool that aims to ensure that banks build up extra capital during periods of economic stability and growth, which can be used to maintain credit flow during economic downturns.
• Objective
  • It requires banks to accumulate a buffer of capital during good times to sustain lending in difficult economic periods.
  • It seeks to achieve the macroprudential goal of curbing excessive lending and system-wide risk during periods of excess credit growth.
• Activation Framework: The credit-to-GDP gap is the primary indicator for activating the CCyB.
  • Other supplementary indicators may also be consider

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