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The editorial “Bankrolling the banks” ( Business Line , January 14), makes a cautious assessment of the state of affairs prevailing in Indian banks, and their preparedness for the proposed Basel III, to be implemented in a specified timeframe from January 1, 2013, to March 31, 2017. By and large, banks were least affected even in the most adverse conditions due to sound fundamentals, and yet, when it comes to critical issues such as raising capital for business expansion, ensuring regulatory compliance and containing non-performing assets, they have always found it challenging.
No business is without risks, and obviously banks, as commercial entities, cannot be an exception. But a high quantum of NPAs is worrying. Capital has become an increasingly scarce commodity; raising capital, especially for public sector banks, will become the biggest challenge. It is estimated that PSBs will need an additional capital of Rs 5 lakh crore in the next five years for implementation of new norms and to sustain a growth of 20 per cent per annum. This is an uphill task for the government.
The RBI, as a market regulator, cannot ignore concerns regarding the proposed implementation schedule for Basel III.
Given the background that the banks are in, the RBI has a greater role to play in ensuring their smooth migration to Basel III.
The idea of having a capital conservation buffer proposed in Basel III is a welcome move, aimed at maintaining renewed stability of the financial system.
S. Umashankar
Nagpur
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