Banking sector may need upto Rs1.75 lakh crore to meet Basel III norms

Reserve Bank of India governor D Subbarao said that the Indian banking sector might need an additional capital of Rs1.60-1.75 lakh crore by March, 2018, in order to conform to Basel III norms.

''Once operational, Basel III norms raise the cost of credit. Banks will need to raise additional capital, over and above their internal accruals and interest earnings, to meet the requirements,'' he said.

He, also said that questions are raised on whether the current banking system, predominantly led by public sector banks, can mobilise such huge capital. ''Can they (public sector banks) do it?'' he asked.

The governor was addressing press persons in Hyderabad, at the sixth anniversary of the Professional Risk Managers' International Association's Hyderabad chapter.

According to Subbarao, one option of meeting the requirement was that the government provide the capital, which however, which it could not do owing to fiscal deficit and natural resources demand constraints, and the other option would be to opt for changing the public sector banking structure.

On the other hand, private banks, could mobilise the required resources, which was evident from the fact that they raised Rs500 billion capital in the last five years.