|
"Such stringent norms stipulated by the RBI (Reserve Bank of
India) for our banks ... is unrealistic and unwarranted," said a
report tabled in parliament by the Parliamentary Committee on
Finance.
The report comes after the government and some of the board
members of the RBI have put pressure on the central bank to
relax capital requirements for banks as they seek to boost
credit and economic growth.
Former RBI governor Urjit Patel, who quit last month, opposed
the government's demand for lowering capital requirements and
warned about the need for a cushion to offset unexpected risks.
Indian banks are required to maintain a minimum capital to risk
weighted asset ratio (CRAR) at 9 percent, against the global
Basel-III requirement of 8 percent. On top of that, they have to
keep a capital conservation buffer that is supposed to climb to
2.5 percent by March 2019.
The rollback of additional capital requirements could release
about 5.34 trillion rupees ($76 billion) into the economy by
releasing capital for lending.
On Friday, the RBI in a report opposed the call to relax current
risk weighting rules which are used to calculate capital
requirements, saying they fortified banks against the risk of
failure. However, it did announce its intention to review
capital regulations.
The rating agencies have warned against dilution of capital
norms for banks.
Saswata Guha, country director, financial institutions, at Fitch
Ratings, said capital ratios for many banks were well below
global standards and any relaxation could prove detrimental to
banks and their ability to absorb unexpected losses.
In India, the recovery on loans that go into default was
historically only about a quarter of the outstanding loan
amount, he said.
"Given such low recovery ratio, any kind of dilution of capital
norms will be credit negative for Indian banks,” Guha said.
According to Fitch's previous estimates, Indian banks need
nearly $65 billion in new bank capital by March 2019 to meet
current regulatory requirements.
In 2017, the government announced a plan for an infusion of 2.11
trillion rupees ($30.06 billion) into 20 state banks by March
2019 to meet Basel-III global demands.
But last month it increased its capital infusion into some
state-run banks to 1.06 trillion rupees ($15.13 billion) in the
current fiscal year ending in March. That is because many banks
have fallen well short of a target to raise about 580 billion
rupees themselves.
(Additional reporting by Suvashree Choudury in MUMBAI and Aftab
Ahmed in NEW DELHI; Editing by Martin Howell)
[© 2019 Thomson Reuters. All rights
reserved.] Copyright 2019 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
 |
|
