Breaking News

You are here » Indian-Commodity  :  Top News  :  Govt in favour of alignment of capital adequacy norms with Basel III norms

14-Nov2018

Govt in favour of alignment of capital adequacy norms with Basel III norms

Instead of present stricter guidelines which restrict the lending capacity of lenders, the government is of the view that the Reserve Bank of India (RBI) should resort to Basel III norms for capital adequacy in banks. Currently, the RBI applies stricter norms and not those specified under Basel III for capital adequacy, leading banks to set aside higher capital for loans. Besides, the RBI has fixed March 2019 as the deadline to meet capital requirements under the Basel III norms for banks.

The government has been in favour of alignment of the capital adequacy norms with Basel III norms. This assumes significance amidst growing tensions between the RBI and the government, with the Finance Ministry initiating discussion under the never-used-before Section 7 of the RBI Act which empowers the government to issue directions to the RBI Governor.

According to the Basel Committee on Banking Supervision (BCBS) report, core capital requirement for banks as prescribed by the RBI is 1% higher than what Basel III norms recommend. Indian banks as per RBI direction are required to maintain 5.5% Common Equity Tier 1 (CET 1) as against 4.5% required under the Basel III framework. The BCBS report said these higher capital norms translate into additional capital requirement, restricting lending potential and income generation.

As per the report, while the Basel framework requires the application of capital standards to all internationally active banks, these have been made applicable in India to all scheduled commercial banks, including banks which are not internationally active. Meanwhile, India has only four internationally active banks, which have more than 10 per cent of their assets in their overseas book.


Related News

View all news

Copper futures end tad higher on upbeat trade talk

Copper futures ended marginally higher on Wednesday due to upbeat comments from US President Donald Trump about a potential trade deal with China. Trump said he would intervene in the Justice Department's......

Gold futures end higher as dollar slides

Gold futures ended higher on Wednesday, with weaker dollar amid report that US consumer prices were unchanged in November, supporting the view that underlying inflation remained firm. Moreover, dimmed......

Physical Rubber prices witness improvement on Wednesday

Physical Rubber prices showed improvement on Wednesday. The market regained strength on short covering but the volumes continued to remain low. Spot prices for RSS-4 variety rose to 120.50/ kg compared......

Top News

View all news

Patels Airtemp receives settlement notice from SEBI

Patels Airtemp (India) has received from SEBI, Summary Settlement Notice vide its Letter dated December 12, 2018 for settlement amount of Rs 3,68,156 against violation of Regulation 7(2)(b) of SEBI (Prohibition......

IndiGo in initial discussion with Qatar, Turkish Airlines for global expansion: Report

In order to increase its global footprint, InterGlobe Aviation (IndiGo) is reportedly in preliminary discussion with Qatar Airways and Turkish Airlines. The Budget carrier is looking for interline and......

Talwalkars Lifestyles integrates with Growfitter

Talwalkars Lifestyles has integrated with Growfitter to introduce the country's first ever AI (Artificial Intelligence) based Incentivized Wellness Program. The Growfitter FITKIT Program is a technologically......