How do you read CET1 ratio?

Banks need at least 8% including the buffer. Above 12% is comfortable, and the strongest banks run 14% or more. On the scale used here, below 9% reads as tight, 9% to 12% reads as adequate, and 12% and above reads as strong. Higher is usually better.

CET1 ratio: what it means and how to read it

What is CET1 ratio?

Common equity tier 1: the lender's purest capital, its share capital and retained profits, as a share of risk-weighted assets.

Total capital includes instruments such as subordinated bonds, which absorb losses only when a bank is already failing. Common equity absorbs them from the first rupee, while the bank is still running. The Basel III rules adopted by RBI therefore set a separate, stricter minimum for it.

Because it is built from profits and share sales, CET1 shows whether a bank funds its own growth. A bank whose CET1 falls year after year while it grows is heading for a share sale that will dilute existing holders.

How it is calculated

CET1 ratio = common equity tier 1 capital ÷ risk-weighted assets, as a percentage.

A worked example

Equity capital and reserves of ₹13,000 Cr against risk-weighted assets of ₹1,00,000 Cr: CET1 = 13%.

Why does CET1 ratio matter?

It is the first cushion to take losses and the hardest to replace, so it is the capital figure investors and regulators trust most.

What is a good CET1 ratio?

Banks need at least 8% including the buffer. Above 12% is comfortable, and the strongest banks run 14% or more.

RBI's minimum is 5.5% plus the 2.5% conservation buffer. In practice banks aim well above: 12% and higher gives room to grow and to absorb a bad year without going to the market.

Reading scale

In %

Tight

Adequate

Strong

6%9%12%16%+

On the scale used here, below 9% reads as tight, 9% to 12% reads as adequate, and 12% and above reads as strong.

Higher is usually better.

What are the common mistakes with CET1 ratio?

Treating total CAR and CET1 as the same thing.

Ignoring the direction of travel over several years.

What is a typical CET1 ratio in India today?

The median across the 41 listed companies that report it, as of 13 Oct 2026. Half sit above each figure and half below.

By company size

Median

Large Cap · 10 companies16.3%

Mid Cap · 10 companies16.0%

Small Cap · 21 companies18.3%

By industry

Median, largest industries first

Private Sector Bank · 2018.1%

Public Sector Bank · 1216.4%

Other Bank · 918.3%

Compare a company with its own industry before the whole market. Every industry, and each company's rank within it, is in the screener.

Is this lender sound, and does it earn enough for the risk it takes?

A bank's raw material is other people's money, so the ratios that judge a factory misread it. These are the figures that matter for banks, NBFCs and housing finance companies: what they earn on lending, how many loans have gone bad, how well they are cushioned against losses, and how cheaply they fund themselves.