Citing need of higher capital requirement to handle Non-performing assets (NPAs), the Finance Ministry has asked the Reserve Bank of India (RBI) to extend deadline for implementing Basel III banking norms beyond March 2019. Besides, the ministry noted that an extension would help banks meet the capital needs and increase credit flow to productive sectors along with balance sheet clean-up.
The apex bank had already extended the timeline for full implementation of the Basel III capital regulations from March 2018 to March 2019 in 2014. It believes that there is a set framework and it should not be disturbed and any divergence from Basel III norms by the RBI can impact the perception on Indian banks and the central bank globally. Besides, the Union Budget has allocated Rs 10,000 crore towards recapitalisation of public sector banks in the current fiscal in line with the Indradhanush scheme.
Meanwhile, Basel III capital regulations have been implemented in a phased manner from April 01, 2013 in India. According to the norms, banks need to maintain a minimum common equity ratio of 8 per cent and total capital ratio of 11.5 per cent by March 2019. Moreover, most of the 21 state-owned banks are already above the average prescribed by RBI but there are 6 PSU banks which have been put under prompt corrective action (PCA) requiring course correction and higher capital to come out of poor financial health.