S&P: Basel III norms to put banks under capital stresshttps://indianexpress.com/article/news-archive/web/sp-basel-iii-norms-to-put-banks-under-capital-stress/

S&P: Basel III norms to put banks under capital stress

Global ratings major Standard & Poor’s on Monday said that the higher capital requirement under Basel III will increase the pressure on Indian banks

Global ratings major Standard & Poor’s 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 India’s 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.