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Saturday, May 5, 2012

Basel -I and Basel II Norms

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Here are some important points about Basel -I and Bales - II Norms.

  • Bank for International Settlements (1930) is at Basel, Switzerland, acts as a coordinating agency for Inter - Central bank dealings and for settling balance of payments imbalances.
  • RBI is a member in BIS since 9th September 1996.
  • These norms come under Basel accord for the regulation of Banks set by the Basel committee mainly to protect the interest of deposits. 
  • Basel - I accord is accountable to two risks
    • Credit Risk
    • Market Risk
  • The Basel - II accord is for "Operational Risk"
  • Basel - II accord's norms 
    • Minimum Capital Requirement
    • Supervisory Review process
    • Market Discipline
  • Basel - III, Requires bank to raise the amount of common equivity that it holds, to 7% of assets from the present 2% requirement.
  • Basel Committee revised the guidelines in June 2001, known as Basel II norms.
  • Under Basel - II norms, 8% is the prescribed capital adequacy ratio.
  • Basel - II norms as prescribed by RBI to various categories of Banks as follows:
    • CAR for Scheduled Commercial Banks (SCBs) --------------   9 % 
    • New Private sector Banks   ----------------------------------- 10 %
    • Banks with Insurance Business -------------------------------- 10 %
    • Local area Banks --------------------------------------------- 15 %
  • To achieve financial inclusion, Banks Started "No Frills accounts" under saving account. (Frills means, unnecessary features). Initial Balance may be Rs.5 or Zero to open this account.
  • 2010 - 2011 Budget proposes to extend Banking, Insurance, and other financial services to those in more than 2000 population villages in 2 Years.
  • World Bank to give two Banking sector support loans of Rs.3.2 Billion.
  • Pranab Mukherjee, Finance Minister won the 2010 Year's "Finance Minister of the year for Asia award. He was also rated one of the Best Finance Ministers, in the world 1984.
  • Yogesh Agarwal is the Chairman, Pension Fund Regulatory and Development Authority (PFRDA). 

Tier I Capital :

  • At Present, the core Tier I capital requirement is 2% Basel committee requires the Banks to raise their top quality capital known as core Tier I, to 7% of their risk bearing assets by 2019.
  • Basel III norms announced last month by the Basel Committee required the above.
  • Govt. recapitalizing the PSBs in 2009-2010 and 2010-2011 to enable them to maintain capital to risk-weighted asset ratio of 12%.
  • This recapitalization aims to improve Tier-I capital of PSBs, while RBI fixed 9% CRAR, the Govt, wants to further strengthen PSBs by adopting 12% CRAR.




9 comments:

  1. thank u for this material..please provide Basel-III norms material...

    ReplyDelete
  2. thanks for providing information.............please provide BASEL III norms it will help who will face bank interviews.........

    ReplyDelete
  3. plz provide all these information in pdf

    ReplyDelete

  4. What does Basel III is all About ?

    According to Basel Committee on Banking Supervision "Basel III is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector".

    Thus, we can say that Basel 3 is only a continuation of effort initiated by the Basel Committee on Banking Supervision to enhance the banking regulatory framework under Basel I and Basel II. This latest Accord now seeks to improve the banking sector's ability to deal with financial and economic stress, improve risk management and strengthen the banks' transparency.


    What are the objectives / aims of the Basel III measures ?

    Basel 3 measures aim to:
    → improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source
    → improve risk management and governance
    → strengthen banks' transparency and disclosures.

    Thus we can say that Basel III guidelines are aimed at to improve the ability of banks to withstand periods of economic and financial stress as the new guidelines are more stringent than the earlier requirements for capital and liquidity in the banking sector.


    How Does Basel III Requirements Will Affect Indian Banks :

    The Basel III which is to be implemented by banks in India as per the guidelines issued by RBI from time to time, will be challenging task not only for the banks but also for GOI. It is estimated that Indian banks will be required to rais Rs 6,00,000 crores in external capital in next nine years or so i.e. by 2020 (The estimates vary from organisation to organisation). Expansion of capital to this extent will affect the returns on the equity of these banks specially public sector banks. However, only consolation for Indian banks is the fact that historically they have maintained their core and overall capital well in excess of the regulatory minimum.

    ReplyDelete
  5. admin post details about banking of financial supervision(BFS) .................

    ReplyDelete
  6. Thnks
    Kindly provid in pdf format

    ReplyDelete
  7. basel cheej kya hai muje to ye hi ni pta chal raha :(

    ReplyDelete
    Replies
    1. basel means rules and regulations

      Delete
    2. Basel is a place in Switzerland chutiyon

      Delete

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