Shyamala Gopinath, former Deputy Governor, Reserve Bank of India (RBI) on Monday said that Indian banks are already adopting Basel-III norms in a phased manner and are steadily progressing towards this global standard.
While talking at an Assocham event here, Ms. Gopinath said that a higher ratio under Basel II and III were not strictly comparable.
In addition to the minimum capital ratio of 8 per cent, Basel-II stipulates capital buffers to be maintained by banks towards capital conservation (2.5 per cent), counter cyclicality (upto 2.5 per cent) and systematic importance (global upto 2.5 per cent domestic up to 1 per cent).
“Another challenge facing the banks is that since pre-Basel-III instruments do not have loss absorbency features, the bank are required to ensure that the derecognised portion of existing additional Tier I and II capital is replaced with Basel III complaint capital to even maintain status quo. No doubt the balance sheet is not static and therefore the step up in capital will need to address this too”, said Ms. Gopinath.
She also highlighted that RBI had already considered that banks can reckon government securities (G-Secs) to the extent permitted under the marginal standing facility (MSF) as level 1 high quality liquid assets (HQLA).
Ms. Gopinath said, “RBI has been progressively reducing the SLR requirements, which stands now at 21.5 per cent.
“The suggestion to reduce further in view of new liquidity standards has some merit.”
