Final norms on implementation of Basel III by April-end: RBI

The Reserve Bank today said it will come out with the final guidelines on implementation of new global risk mechanism, Basel III capital regulations by the end of this month.

"It is proposed to issue the final guidelines on the implementation of Basel III capital regulations by end-April 2012," RBI said in its annual credit policy for 2012-13.

Last year, RBI issued draft guidelines on implementation of Basel III capital regulations envisaging that the equity capital of a bank should not be less than 5.5 per cent of risk-weighted loans.

The guidelines provide a roadmap for smooth implementation of Basel III capital regulations in a phased manner.

"The RBI is also in the process of estimating, on the basis of data collected from banks, the likely impact of the proposed Basel III norms on banks' capital position and leverage," it said.

It is proposed that the implementation period of minimum capital requirements and deductions from Common Equity will begin from January 1, 2013 and be fully implemented as on March 31, 2017, it said.

However, it said, the capital conservation buffer requirement is proposed to be implemented between March 31, 2014 and March 31, 2017.

Besides, the RBI has asked banks to bring down interest variation on term deposits irrespective of the amount.

The RBI has stipulated that banks should not discriminate in the matter of interest rate paid on deposits, except in respect of fixed deposit schemes specifically meant for resident Indian senior citizens and single term deposits of Rs 15 lakh and above.

However, it is observed that there are wide variations in banks' retail and bulk deposits rates, making it unfair to retail depositors, it said.

Further, banks are offering significantly different rates on deposits with very little difference in maturities. This suggests inadequate liquidity management system and inadequate pricing methodologies.

It is, therefore, advised that banks should have a board approved transparent policy on pricing of liabilities and should also ensure that variation in interest rates on single term deposits of Rs 15 lakh and above and other term deposits is minimal, RBI said.

The central bank also said that a working group under the chairmanship of Deputy Governor Anand Sinha on pricing of credit was constituted in January 2012. The group is reviewing the current practice regarding pricing of floating rate loan products in India vis--vis the international practices, it said.

The group will also study the methodology of determination of credit spreads and its components and suggest measures for appropriate pricing of floating rate loan products to improve transparency in pricing and loan documentations, it said.

The working group, it said, which is required to submit its report by end-July 2012.