The Reserve Bank of India Governor D. Subbarao on Saturday wanted the Indian banking industry to prepare itself to raise an additional capital of between Rs 1,60,000 crore and Rs 1,75,000 crore by March 2018 to conform to the new Basel III capital adequacy norms.
Basel III is a comprehensive set of reform measures developed by the Basel Committee on Banking Supervision to consolidate the regulation, supervision and risk management of the sector.
These aim at propping up the banking sector’s ability to absorb shocks arising from financial and economic stress and improve risk management.
“Our estimate is that after accounting for (their) internal accruals and interest earnings, banks should raise an additional capital of between Rs 1,60,000 crore and Rs 1,75,000 crore,” he said at a meeting here today.
With a major slice of this to be raised by state-owned banks, the RBI chief asked: “Can PSU banks do it (raise the required capital)?”
One way could be for the Government to help the PSU banks raise the resources, but this seems difficult as it was constrained by the fiscal deficit and competing demands on natural resources.
In regard to the private sector banks, Subbarao said private banks could raise their share of the additional capital.
“In the last five years, these banks have raised Rs 50,000 crore,” he pointed out.
The RBI has set a deadline of March 2018 for Indian banks to complete their conformation to the Basel III norms.
“We did not want to drag it till the end of March 2019, as it could result in awkward situation attracting adverse international notice,” he said.