Banks need Rs1,60,000-cr more to meet Basel III capital norms: RBI governor
04 August 2012
Banks in India would have to raise additional capital of about Rs1,60,000 crore to Rs1,75,000 crore by March 2018 to conform to the new Basel III capital adequacy norms, Reserve Bank governor D Subbarao said today.
''Our estimate is that after accounting for internal accruals and interest earnings, banks should raise an additional capital of between Rs1,60,000 crore and Rs1,75,000 crore,'' he said at a meeting here today.
To meet this public sector banks in India needs funding from government or have to sell shares in the market, he said.
"The question is can PSU banks mobilise this sort of capital, or can the government give this sort of capital. We are aware of the constraints on the government", the RBI governor said.
"The alternate to the government is either to reduce shareholding below 50 per cent or slowdown PSU growth, Subbarao said in his keynote address delivered at Centre for Economic and Social Studies.
However, he said, banks in the private sector may have the flexibility to raise the needed capital.
"They probably can, because Rs50,000 crore was raised in last 5 years," Subbarao pointed out.
Basel III international accounting standards were conceived after the 2008-09 financial crisis to strengthen banks' capital base and improve their ability to withstand shocks.
The RBI has set a deadline of March 2018 for Indian banks to comply with the Basel III norms.
''We did not want to drag it till the end of March 2019, as it could result in awkward situation attracting adverse international notice,'' he said.