Effect of change in Basel standards in the Banking Industry

Type :

Indian project

Pages :

38 pages

Format :

.doc

Published date :

04/15/2009

Category :

Economics & finance

Sub category :

Finance

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Summary :

Introduction
The concept of Basel-III norms in Indian banks
Research methodology
An abstract of market discipline
Data analysis and presentations
List of tables
1. Scheduled commercial banks
2. Capital adequacy ratio â€" Scheduled commercial bank wise
Bibliography
Conclusion

Abstract

As the deadline for implementing the basel-III norms in Indian banks has arrived they are still preparing to solve the enigma of risk management for insuring more transparent and risk-free financial bases. According to the Reserve Bank of India, its association with the basel 'Committee on banking Supervision' dates back to the year 1997, as India was among the 16 non-member countries that were consulted while drafting of the core principles of the basel I II and III norms. The RBI at that time became a member of the 'Core Principles Liaison Group' in 1998, and subsequently became a member of the 'Core Principles Working Group Committee on Capital'. basel I norms focused on the teaching of credit and market risks faced by the banks. The basel II norms brought into focus a larger number of risks requiring management by banks on a larger canvas. Besides the increase in the number of risks, to be managed banks are now beginning to focus on their inter-linkages with a view to achieve a more comprehensive risk management framework. The implementation of the basel II norms, therefore, is being increasingly seen as a medium through which banks could constantly endeavor to upgrade their risk management systems in order to address the changing risks environments in which they operate. basel II prescriptions have ushered in a transition from the traditional regulatory measure of Capital Adequacy to an evaluation of whether a bank had found the most efficient use of its capital to support its business portfolio i.e., a transition from capital adequacy to capital efficiency. In India, banks had been following the earlier basel-I since 1993-94. In fact, regulators required a minimum Capital to Asset Ratio of 9 per cent, which was above the 8 per cent level as mentioned in the basel-II accord. Despite being one of the fastest growing economies in the world, Indian banks are far behind their western counterparts in relation to their risk measurement and management techniques and managing their credit market and operational risks.