Finmin requests RBI to relax capital adequacy norms

New Delhi: The Finance Ministry has requested the Reserve Bank to relax capital adequacy norms for banks in line with the recommendations made earlier this month by the Basel Committee on Banking Supervision.

“RBI is fully seized of the matter and we have also requested it to look into the issue. We are in conversation with them,” said an official source. RBI deferred the implementation of Basel III, the global capital norms for banks, by three months to April 1.

[caption id=“attachment_590739” align=“alignleft” width=“380”]  The deadline for the full implementation of the stiff liquidity norms or Liquidity Coverage Ratio (LCR) for banks, which were to kick in from 2015. Reuters[/caption]

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The deadline for the full implementation of the stiff liquidity norms or Liquidity Coverage Ratio (LCR) for banks, which were to kick in from 2015, has been extended till 2019. Earlier this month, oversight panel Group of Governors and Heads of Supervision (GHOS), which includes representation from India, of the Basel Committee on Banking Supervision decided to ease the LCR regulations.

The Committee, a grouping of top regulators and central bankers, had mooted the stiff liquidity requirements for banks to ring fence as well as prevent financial disruptions. A major component of the Basel III banking norms, LCR aims to ensure that a bank has an adequate stock of unencumbered high quality liquid assets to meet liquidity needs for a month’s stress scenario.

The LCR would be introduced as planned on January 1, 2015, but the minimum requirement would be 60 percent. The same would be increased by 10 percentage points in the subsequent years to reach 100 percent on January 1, 2019.

According to GHOS, this graduated approach is designed to ensure that the LCR can be introduced without disruption to the orderly strengthening of banking systems or the ongoing financing of economic activity.

Among others, the panel has approved amendments to LCR rules, including revisions to the definition of high quality liquid assets and net cash outflows.

PTI