RBI on April 20, 2023 has notified that it is not necessary to activate CCyB at this point in time. A capital buffer is capital that a bank must hold in addition to the minimum requirement. A countercyclical capital buffer is a type of capital buffer that regulators might impose on banks.
A countercyclical capital buffer would raise banks’ capital requirements during economic expansions, with banks required to maintain a higher capital-to-asset ratio when the economy is performing well and loan volumes are growing rapidly. Conversely, it would require a lower capital-to-asset ratio during recessions.
The framework on countercyclical capital buffer (CCyB) was put in place by the Reserve Bank in terms of guidelines issued on February 5, 2015 wherein it was advised that the CCyB would be activated as and when the circumstances warranted, and that the decision would normally be pre-announced.