Global ratings major Standard & Poors on Monday said that the higher capital requirement under Basel III will increase the pressure on Indian banks to raise capital and can lead to some changes in the industry.
According to S&P,banks face a constant need to replenish capital at regular intervals to support their high growth. Starting April 1,2013,banks will begin to implement the new Basel III capital requirement,which will increase their capital requirement in phases.
We estimate Indian banks will require minimum additional capital of about Rs 69,100 crore to meet the Reserve Bank of Indias 8 per cent requirement for the common equity tier 1 and capital conservation buffer ratio, it said.
The additional capital requirement could rise to Rs 2,60,000 crore,given a tendency for banks to hold higher-than-minimum capital and the limited market for hybrid instruments in India,the report,titled Indian banks may need Rs 2.6 trillion of additional capital by 2018 as they strive to meet Basel III requirements said.