The Hindu Business Line : RBI to set up panel to implement Basel II norms

THE Reserve Bank of India plans to set up a steering committee to enable the implementation of the Basel II norms for capital adequacy of banks, according to Ms K.J. Udeshi, Deputy Governor, RBI.

At a two-day seminar on capital adequacy framework under Basel II, organised to sensitise the Chief Executive Officers and the Boards of banks towards the opportunities and challenges emerging out of the Basel II norms, Ms Udeshi said that the steering committee would have a smaller focused sub-committees for each of the three pillars of Basel II with members representing interests of all stakeholders.

The main benefit of Basel II will flow from the greater awareness of risk that it will instill in the banks, she said, highlighting the opportunities and challenges of the new norms.

It also has in-built incentives for improved risk analysis, risk management systems, allocation of capital and pricing of risk.

Achieving sophistication in their risk management capabilities might enable banks to improve the quality of their asset portfolio.

Importantly, Basel II permits banks a choice between Standardised Approach and Internal Ratings Based Approach towards measurement of capital requirements for credit risk, she said.Internal Ratings Based Approach differs substantially from the Standardised Approach to the extent that banks' internal assessments of key risk parameters serve as primary inputs to capital calculation.

The new norms require a lot of disclosures of risks and the risk management practices. Data sharing is also very crucial under the new norms.

With effect from the current financial year, banks in India will be maintaining capital for credit risk and market risks on the lines of Basel I.

More Stories on : RBI & Other Central Banks

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page