The Indian government is in discussion with the Reserve Bank of India to explore ways to defer the full implementation of international capital norms or Basel-III norms for Indian banks which are floundering in bad debt.
An extended timeline to meet the capital needs would provide the necessary breather to banks to lend more while they grapple with bad loans and raise capital.
It is imperative for banks to meet the Basel-III regulatory norms by March 2019.
According to the norms laid down by RBI, Indian lenders have to maintain a minimum common equity ratio of 8% and total capital ratio of 11.5% by 2019.
As of March 2017, state-run banks maintain an average common equity ratio of 8.5%.
Some public sector banks (PSBs) are however struggling and already four lenders are under the prompt corrective action plan of the regulator.
According to RBI estimates, state-run banks would require Rs 1 lakh crore while the entire banking sector would require an additional capital requirement of Rs 5 lakh crore to meet the norms by 2019.
Banks may not be able to raise the required capital, which would curtail their ability to lend.
This comes at a time when stressed assets of banks rose to Rs 7.4 lakh crore at the end of March 2017 from Rs 7 lakh crore a year ago. A senior finance ministry official said that some discussion has been held on this issue and the regulator is also open to the suggestion.
It would support banks as they are all set to tackle bad loans under the new norms approved by the government and RBI, the official said.
An email sent to RBI did not elicit any response till the time of going to press.
(The Economic Times)
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