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RBI releases Draft Report on Implementation of Countercyclical Capital Buffer Framework in India. The key recommendations of the IWG are: While the credit-to-GDP gap shall be used for empirical analysis to facilitate CCCB decision, it may not be the only reference point in the CCCB framework for banks in India and the credit-to-GDP gap may be used in conjunction with other indicators like Gross Non-Performing Assets (GNPA) growth for CCCB decisions in India. The CCCB decision may be pre-announced with a lead time of 4-quarters. The lower threshold (or L) of the CCCB when the buffer is activated may be set at 3 percentage points of the credit-to-GDP gap, provided its relationship with GNPA remains significant and the upper threshold (or H) may be kept at 15 percentage points of credit-to-GDP gap. The CCCB shall increase linearly from 0 to 2.5 per cent of the risk weighted assets (RWA) of the bank based on the position of gap between 3 percentage points and 15 percentage points. However, if the gap exceeds 15 percentage points, the buffer shall remain at 2.5 per cent of the RWA. If the gap is below 3 percentage points then there will not be any CCCB requirement. The supplementary indicators shall include incremental C-D ratio for a moving period of three-years (along with its correlation with credit-to-GDP ratio gap and GNPA growth), Industry Outlook (IO) assessment index (along with its correlation with GNPA growth) and interest coverage ratio (along with its correlation with credit-to-GDP gap). In due course, indices like House Price Index / RESIDEX and Credit Condition Survey may also form a part of the supplementary indicators for CCCB decision. The Reserve Bank of India may apply discretion in terms of use of indicators while activating or adjusting the buffer. The CCCB framework in India may be operated in conjunction with sectoral approach that has been successfully used in India over the period of time. The same set of indicators that are used for activating CCCB may be used to arrive at the decision for the release phase of the CCCB. However, instead of hard rules-based approach, flexibility in terms of use of judgment and discretion may be provided to the Reserve Bank of India for operating the release phase of CCCB. Further, the entire CCCB may be released promptly at a single point in time. The indicators and thresholds used for CCCB decisions may be subject to continuous research and empirical testing for their usefulness and new indicators may be explored to support CCCB decisions.