Ratings
agency Moody's said stricter Basel III standards set for Indian
banks by RBI are credit positive as they focus on strengthening Tier-I capital.
Last week, RBI released final Basel III capitalisation standards for Indian banks that are more conservative than those outlined by the Bank for International Settlements (BIS), Moody's said in a study.
"These stricter standards are credit positive for Indian banks as they focus on strengthening Tier 1 capital and attach a higher value to core equity within Tier 1 capital," it said.
RBI's finalised standards specify that minimum Tier-I capital ratios are 1 percentage point higher than Basel III standards, and require that Tier 1 capital is of higher quality than the BIS mandates, it said.
In addition, it said, India's Basel III standards mandate a capital conservation buffer of 2.5 per cent of risk weighted assets built from core equity over a four-year period, and that banks achieve these stricter requirements nearly two years earlier than Basel III's schedule.
Last week, Moody's Indian subsidiary ICRA had said banks in the country will require between Rs 3.9-5 lakh crore as capital to comply with Basel III norms.
"Banks will need Rs 3.9-5 trillion capital over the next six years, out of which common equity requirements will be Rs 1.3-2 trillion; Rs 1.9 trillion for additional Tier-I; and Rs 1 trillion for Tier-II," it said.
This is achievable, "so long as banks can find investors for the riskier additional Tier-I capital," it said.
The Reserve Bank issued final guidelines for Basel III beginning January 1, 2013, and to be implemented by March 31, 2018.
The new norms ask banks to maintain a minimum 5.5 per cent in common equity by March 31, 2015 against 3.6 per cent now, apart from creating a capital conservation buffer consisting of common equity of 2.5 per cent by March 31, 2018.
It also hiked the minimum overall capital adequacy to 11.5 per cent by March 31, 2018 against 9 per cent now.
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