A former banker has said that raising the required amount of capital under Basel III would be a challenge.
Delivering the keynote address at a conference on ‘Indian banking: Managing transformation in the era of globalisation and information technology’ in Mangaluru on Tuesday, G Gopalakrishna, Director of CAFRAL (Centre for Advanced Financial Research and Learning) and former Executive Director of Reserve Bank of India (RBI), said that Indian banks in general have a relatively comfortable capital adequacy position to begin with in the process of the phased adoption of Basel III capital norms. Going forward, raising the required amount of capital would be a challenge.
The guidelines on Basel III capital regulations became effective from April 1, 2013, and in phased it will be fully implemented as on March 31, 2019.
Though there are various estimates about the additional capital mobilisation by public sector banks (PSBs), arising out of the phased implementation of the Basel III capital requirements, one thing is clear that the required magnitude of capital in the run up to the full implementation will be substantial, he said.
The growing pressure on the asset quality of PSBs and the threat of rating downgrades will further add pressure on the equity of banks. There would be requirement of capital based on supervisory review and evaluation process, he said.