Indian Banks require Rs 2.7 lakh crore to meet Basel-3 norms: CRISIL

Rating agency CRISIL on Thursday said that Indian banks would need to raise Rs 2.7 lakh crore to achieve the tier-1 capital of 8 per cent under Basel-3 capital adequacy norms by March 2018-- the set deadline by Basel committee to meet such norms.

CRISIL said the banks need to raise Rs 1.3 lakh crore as equity Tier-1 capital and up to Rs 1.4 lakh crore in non-equity while adding that raising the former will be easy but latter may be challenging as the norms are quite riskier than under the Basel-2.

CRISIL said there would be some risks in raising non-equity tier-1 capital like discretion on coupon payments and likelihood of coupon non-payment and principal loss if a bank's equity capital falls below the pre-specified thresholds

"It will limit investor appetite for such instruments and will also reduce their attractiveness for banks, as these instruments will be costlier than those under Basel-II," said Ramraj Pai, president, CRISIL.

He added that this risk can be cooled off by development of bond markets to help banks raise the non-equity capital. He also said that a holding company for the state-run banks could help in raising investors' confidence in non-equity instruments.

RBI had estimated the total capital requirement of Rs 5 lakh crore in tier-1 and tier-2 segments. It had estimated Rs 3.25 lakh crore of equity capital and Rs 1.75 lakh crore of non-equity capital for Basel-III requirements.

Read more about: banking
Story first published: Friday, February 22, 2013, 13:31 [IST]
Please Wait while comments are loading...
Company Search
Enter the first few characters of the company's name or the NSE symbol or BSE code and click 'Go'

Thousands of Goodreturn readers receive our evening newsletter.
Have you subscribed?