You can't analyse a bank without knowing who referees it. In banking, the regulator sets the product's specifications, the accounting and the failure process.
Who regulates banks in India?
India has one referee for everything, and it's the RBI. It licenses banks under the Banking Regulation Act, 1949. It sets monetary reserve requirements. CRR is ~3 to 4% of net demand and time liabilities and earns nothing, and SLR is ~18%, held in G-secs. Both move with policy, so pull the live values from rbi.org.in. It sets liquidity standards, including an LCR of ≥100% of 30-day stressed outflows held in high-quality liquid assets, and the NSFR. It writes prudential rules through Master Directions and circulars, and above all the IRAC norms for income recognition and asset classification.
Those norms carry the 90-day NPA rule and the classification ladder, on which a loan moves from standard to substandard to doubtful (D1/D2/D3 by age) to loss. Minimum provisioning steps up from 0.4% on standard assets to 15 to 25% for substandard, 25 to 100% for doubtful and 100% for loss. Verify the current matrix. RBI also runs the Large Exposures Framework, which caps concentration in a single borrower or group. It sets the priority sector lending rule (40% of adjusted net bank credit) and governance rules on CEO tenure and board composition. Its annual supervisory inspection is what produces the divergence disclosures in the KPI panel. And it publishes the analyst's free toolkit: the semi-annual Financial Stability Report, the annual Report on Trend and Progress of Banking in India and the DBIE database.
Advertisement
What is prompt corrective action (PCA)?
PCA is the regulatory emergency room. Under the revised Prompt Corrective Action framework (November 2021, effective January 2022; check the live matrix), a bank is captured when it breaches the risk thresholds set for three indicator families. On capital, that's CRAR incl. CCB below 11.5% or CET1 incl. CCB below 8%, with deeper thresholds ~250/400 bp lower. On asset quality, it's NNPA ≥6%, ≥9% and ≥12% for risk thresholds 1/2/3. On leverage, it's a Tier 1 leverage ratio below 4%, then 3.5%. Capture triggers mandatory restrictions. Dividends stop and branch expansion freezes, and at deeper thresholds come curbs on management pay and directed cuts to risky exposures. Its 2017 predecessor also used negative ROA for consecutive years as a trigger. The 2021 revision dropped profitability as a formal indicator, but eleven PSU banks plus private banks spent 2017 to 2021 inside PCA under the old rules. For you as an analyst, PCA thresholds turn the KPI panel into a distance-to-trouble gauge. A bank at CET1 9% and NNPA 4.5% is two bad quarters from a regime where it can't grow at all. Price that in.
Who regulates banks in the United States?
The United States has a committee of referees. National banks answer to the OCC and holding companies to the Federal Reserve. Deposit insurance and failed-bank resolution belong to the FDIC, and state-chartered banks add state regulators on top. Confidential CAMELS ratings do the supervisory scoring. Capital runs on the same Basel III chassis (CET1 ≥4.5% + 2.5% CCB), with a US twist. For large banks the annual CCAR/DFAST stress tests generate a bespoke stress capital buffer (≥2.5%), and G-SIBs add a surcharge. So JPMorgan's effective CET1 requirement comes out around 12 to 12.5%. Verify the current figure. Know the post-2018 category tailoring too. Banks fall into Categories I to IV by size. Below $250bn the liquidity and stress requirements are lighter. SVB, at $209bn, was Category IV. That exempted it from the full LCR and let it leave bond mark-to-market losses (AOCI) out of regulatory capital, and both exemptions turn up again in the SVB autopsy.
Disclosure differs too. US banks file a 10-K and 10-Qs plus quarterly regulatory call reports, and the FFIEC's UBPR gives free peer-comparison ratios that no Indian source matches. Watch for one vocabulary landmine. In India SLR is the statutory liquidity ratio, the G-sec holding requirement. In the US SLR is the supplementary leverage ratio. Same letters, different planets.
One deliberate gap, so you know where to go for the mechanics. The lesson on multinationals and financial institutions owns the CAMELS scorecard letter by letter. It also builds the liquidity coverage ratio and the net stable funding ratio end to end from a stated balance sheet, including what it costs to close a funding shortfall. Here you keep the twelve-KPI panel and use those ratios as inputs. When you need to construct one of them instead of reading it, go back there.
How do Indian bank terms map to the US?
The translation table, India to US:
| Indian term | US equivalent | US healthy marker |
|---|---|---|
| GNPA ratio | Nonaccrual/nonperforming loans ratio | <1% of loans |
| PCR | ACL (allowance) coverage of NPLs | >100% common |
| Credit cost | Provision for credit losses ÷ avg loans; watch net charge-off (NCO) rate | NCOs: mortgage ~0.1%, cards 3–4% |
| Cost-to-income | Efficiency ratio | <60% good, <55% strong |
| CASA | Noninterest-bearing + low-cost transaction deposits | >25–30% noninterest-bearing |
| CRAR/CET1 | Same Basel terms + stress capital buffer | CET1 comfortably above bespoke requirement |
| NIM 3–4.5% | NIM | 2.5–3.5% |
| ROA >1%/1.5% | ROA | >1% good, >1.3% excellent |
| ROE 15%+ | ROTCE (return on tangible common equity) | >15% strong |
| IRAC provisioning floors | CECL — lifetime expected loss on origination | reserve build/release drives EPS |