Reducing its stake in public sector banks to below 50 per cent is an option before the government to enable them meet capital requirement norms under Basel III, Reserve Bank of India Governor D Subbarao said here on Saturday. He said Indian banks need to raise Rs 1.5 lakh crore to Rs 1.75 lakh crore as capital to meet the Basel-III norms which are to be implemented by March 31, 2018. Basel-III international accounting standards were conceived after the 2008-09 financial crisis to strengthen banks’ capital base and improve their ability to withstand shocks. “Question is can PSU banks mobilise this sort of capital, or can the government give this sort of capital. We are aware of the constraints on the government”, the RBI governor said. “The alternate to the government is either to reduce shareholding below 50 per cent or slow down PSU growth,” Subbarao said in his keynote address delivered at Centre for Economic and Social Studies. He was, however, hopeful that private sector banks may be able to raise capital. Subbarao added that the main takeaway from the 2008 crisis is that regulators need to pursue financial stability explicitly, not as a byproduct of price and macroeconomic stablity. Source: Indian Express
Friday, 17 August 2012
Banks need over Rs 1.5 lakh crore to meet Basel-III: Subbarao
Reducing its stake in public sector banks to below 50 per cent is an option before the government to enable them meet capital requirement norms under Basel III, Reserve Bank of India Governor D Subbarao said here on Saturday. He said Indian banks need to raise Rs 1.5 lakh crore to Rs 1.75 lakh crore as capital to meet the Basel-III norms which are to be implemented by March 31, 2018. Basel-III international accounting standards were conceived after the 2008-09 financial crisis to strengthen banks’ capital base and improve their ability to withstand shocks. “Question is can PSU banks mobilise this sort of capital, or can the government give this sort of capital. We are aware of the constraints on the government”, the RBI governor said. “The alternate to the government is either to reduce shareholding below 50 per cent or slow down PSU growth,” Subbarao said in his keynote address delivered at Centre for Economic and Social Studies. He was, however, hopeful that private sector banks may be able to raise capital. Subbarao added that the main takeaway from the 2008 crisis is that regulators need to pursue financial stability explicitly, not as a byproduct of price and macroeconomic stablity. Source: Indian Express