Banks facing more challenges in current environment: RBI
The topic of the seminar assumes significance as the RBI earlier this week issued draft guidelines for implementation of Basel-III banking norms in India, which envisage that the equity capital of a bank should not be less than 5.5 per cent of its risk-we
Banks worldwide are facing more challenges in the current economic environment and while macro-sustainability is a necessity, it is not sufficient for sustainable economic growth, according to a senior Reserve Bank official.
Speaking during the inauguration of a national seminar on 'Basel III: Implementation Challenges in Bank' organised by the Bank of Maharashtra, RBI Deputy Governor Anand Sinha said while regulation is important, so is implementation.
"Banks globally are facing more challenges now and macro-sustainability is a necessity but not sufficient for sustainable economic growth. Therefore, putting regulations in place is only one part and their implementation is equally important for achieving growth and sustainability," Sinha said.
Sinha, who is in charge of regulation of commercial banks, non-banking financial companies and urban cooperative banks in the RBI, also talked about the 2008 global economic crisis and how the Indian banking sector had withstood it.
He also made an elaborate presentation on the genesis of the crisis, its causes, regulatory reforms following the crisis, implementation issues, structural issues and the impact on growth.
The seminar was attended by RBI General Manager Ajay Chowdhary and Bank of Maharashtra Chairman & Managing Director AS Bhattacharya.
The topic of the seminar assumes significance as the RBI earlier this week issued draft guidelines for implementation of Basel-III banking norms in India, which envisage that the equity capital of a bank should not be less than 5.5 per cent of its risk-weighted loans.
It also recommended that Tier-1 capital, comprising pure equity and statutory and capital reserves, must be at least 7 per cent and total capital must be at least 9 per cent of risk-weighted assets (RWAs).
It has also suggested setting up a capital conservation buffer in the form of common equity of 2.5 per cent of RWAs.
It is proposed that the implementation period of minimum capital requirements and deductions from common equity will begin from January 1, 2013, and will be fully implemented by March 31, 2017, it said.
The central bank had invited comments and feedback on the draft guidelines, including the implementation schedule, by February 15, 2012.
RBI Governor D Subbarao had earlier said that Indian banks will have to incur additional costs to build capital buffers to comply with Basel-III rules.