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Parliamentary panel asks central bank to review rules on capital requirements for banks

04 Jan 2019 Evaluate

With an aim to increase lending of banks, a parliamentary panel has asked the Reserve Bank of India (RBI) to ease capital adequacy norms for banks, review supervisory framework - prompt corrective action (PCA). Panel also urged the government to set up a committee to look into issues concerning accountability of the central bank as a regulator. The standing committee on finance also asked the RBI to evaluate the efficacy of its own guidelines on dealing with frauds.

Talking about the RBI's decision to keep capital adequacy norms higher than prescribed under global framework of Basel III, the lawmakers said the central bank has restricted lending capacity of banks and increased the burden on the government for recapitalisation of PSBs. Indian banks are required to maintain a minimum capital to risk weighted asset ratio (CRAR) at 9%, against the global Basel-III requirement of 8%. The committee said it has been informed that while Basel framework requires application of capital standards to internationally active banks of the 21 PSBs, nine PSBs are not internationally active as also most of the older private banks are also not internationally active.

Besides, the committee also suggested increasing the retirement age of chiefs of public sector banks to 70 years and effect proper manpower planning and HR development strategies in PSBs.

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