RBI extends Basel III implementation time

The Reserve Bank of India (RBI) has extended the date for implementation of Basel III, the global capital norms for banks, by three months to 1 April. “The Reserve Bank of India has rescheduled the start date for implementation of Basel III to 1 April 2013 from 1 January 2013,” the central bank said.

RBI, however, did not provide reasons behind the rescheduling.

The move, experts said, will provide additional time to some banks that need to enhance their capital base in line with the new norms for strengthening the resilience of the global banking system.

RBI further said that India will closely monitor the progress on Basel III implementation in other countries, particularly the major ones, who are the members of the Basel Committee.

RBI had issued guidelines on the implementation of Basel III capital regulation in India in May this year. These guidelines were to be implemented from 1 January 2013 in a phased manner and were to be fully implemented by March 2018. As per the new global norms, banks will have to hold core capital of at least 7% of risk weighted assets by 2018.

In September, RBI governor D. Subbarao had said that Indian banks will require an additional capital of Rs.5 trillion to meet the new global banking norms.

Of the total Rs.5 trillion, equity capital will be Rs.1.75 trillion, while Rs.3.25 trillion will have to come as the non-equity portion.

The government, which owns 70% of the banking system, alone will have to pump in Rs.900 billion equity to retain its shareholding in the public sector banks (PSBs) at the current level to meet the norms.

The Basel Committee recently said that the 11 member jurisdictions including India, Australia, Canada, China and Japan, have published the final set of Basel III regulations effective from the start date of 1 January 2013.

Seven other jurisdictions including the European Union and the US have issued draft regulations, and have indicated that they are working towards issuing final versions as quickly as possible.

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