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The Basel Committee undertook a quantitative impact study in October 2002 involving a range of banks across 45 countries, including seven Indian banks.

Mumbai , Sept. 28

THE Reserve Bank of India (RBI) will convene a meeting of Indian banks before the year-end in order to work towards the implementation of Basel II norms. (The deadline for compliance to Basel II norms is 2006.)

Ms Shyamala Gopinath, Executive Director, RBI, said: "We will have a meeting with banks shortly to evaluate the new framework and plan for the transition of Indian banks to Basel II norms. We may conduct a quantitative impact study, if necessary.''

The Basel Committee undertook a quantitative impact study in October 2002 involving a range of banks across 45 countries, including seven Indian banks.

"The timing, approach and sequencing of the Basel norms will have to be closely tailored to our circumstances,'' Ms Gopinath told a gathering of bankers at a conference on `Indian Banking: Global Benchmarks `03', organised by the Federation of Indian Chambers of Commerce and Industry on Friday.

Highlighting some of the reservations the central bank had about the Basel II norms, she said, "The complexity and sophistication essential for banks in implementing the New Capital Accord restricts its universal application in the emerging markets.''

The new norms envisage stringent risk management measures to face operational, credit and market risk, which is expected to lead to increased capital requirements of banks.

She also spoke about how banks would have to invest heavily in sophisticated MIS/data processing capabilities.

Banks also do not have robust rating systems and historical data on probability of default, which would be necessary for the new norms.

The RBI has to focus efforts on building a robust supervisory review frameworkThe supervisors too need to devote resources in terms of skilled personnel, technical training and rating validation systems to evolve a wholesome new supervisory process.

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