RBI postpones Basel-3 implementation to April 1, 2013

Posted By: Religare
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RBI postpones Basel-3 implementation to April 1, 2013
The Reserve Bank of India (RBI) has postponed the implementation of Basel-3 norms to April 1, 2013 from January 1, 2013.

"The Reserve Bank of India has rescheduled the start date for implementation of Basel III to April 1, 2013 from January 1, 2013," said RBI in a notification.

Experts said that with this move, the central bank has bought more time for the banks to improve their capital adequacy in line with the requirements of new norms.

The central bank's notification also said that India will also closely monitor the progress on Basel-3 implementation in other countries, particularly the major ones who are the members of the Basel Committee.

RBI had earlier fixed the January 1 deadline, even as Indian Financial Year begins on April 1, keeping in view the internationally accepted implementation schedule as agreed to by the Basel Committee on Banking Supervision (BCBS).

The financial stability report, released last week, said that Indian banks needed an additional capital of Rs 5 trillion to comply with Basel-3 norms. It said banks may need Rs 3.25 trillion in the form of non-equity capital while Rs 1.75 trillion in the form of equity capital over the next five years.

However, RBI said additional challenges could be posed by the recent trends in asset quality of banks, regulatory changes in restructuring guidelines and the proposed implementation of dynamic provisioning norms that may increase the provisioning requirements of the banking sector.

As per Basel-3 norms, banks will have to maintain their total capital ratio at 9 per cent, higher than the minimum recommended requirement of 8 per cent. It will also require banks to maintain Tier I capital at 7 per cent of risk weighted assets and a capital conservation buffer of 2.5 per cent of risk-weighted assets.

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