Indian banks face Basel III on April 1

Reserve Bank of India to issue a notification for the implementation of Basel III this week.

RBI Governor D. Subba Rao said the Basel III regulations will be based on guidelines issued last year. RBI rescheduled Basel III from January 1 to April 1 to give Indian banks four months to improve their capital adequacy in conformity with the new standards.

"Banks will require high level of capital as credit will become more expensive. The credit to GDP ratio has to go up for accelerating economic growth," Rao said.

Under Basel III, Indian banks will have to maintain their capital adequacy ratio at 9% compared to the minimum recommended requirement of 8%.

Banks also have to maintain Tier 1 capital (equity and reserves) at 7% of risk weighted assets and a capital conservation of 2.5% of RWA.

Basel norms are a set of international banking regulations devised by the Basel committee on bank supervision. They mandate the minimum capital requirements to sustain banks the world over.

According to RBI, Indian banks will require an additional capital of US$92 billion to comply with Basel III. This includes US$60 billion as non-equity capital and US$32 billion in the form of equity capital over the next five years.