This comes as a relief for banks as Basel III norms require the equity capital of a bank to be not less than 5.5 per cent of risk-weighted loans, as per the draft guidelines issued by the RBI.
Earnings of banks are likely to come under pressure due to the higher capital requirements for the implementation of the new global risk mechanism.
The RBI said it will be closely monitoring the progress on Basel III implementation in other countries, particularly the major ones that are the members of the Basel Committee.
The RBI had issued guidelines on implementation of Basel III capital regulation in India on May 2, 2012.
These guidelines were to be implemented as on January 1, 2013, in a phased manner and were to be fully implemented as on March 31, 2018.
The commencement date of Basel III implementation was kept as on January 1, 2013, even though the financial year begins on April 1, keeping in view the internationally accepted implementation schedule as agreed to by the Basel Committee on Banking Supervision (BCBS).
The Basel Committee in a press release dated December 14, 2012, observed that the eleven member jurisdictions have published the final set of Basel III regulations effective January 1, 2013.
These include Australia, Canada, China, Hong Kong SAR, India, Japan, Mexico, Saudi Arabia, Singapore, South Africa and Switzerland.
Seven other jurisdictions including the European Union and the United States have issued draft regulations, and have indicated that they are working towards issuing final versions as quickly as possible.
The Basel Committee has further observed that, “The globally agreed timeline includes a number of milestones from 2013 to 2019, designed to provide for a gradual phasing in of the new capital requirements. It is expected that as remaining jurisdictions finalise their domestic regulations during 2013, they will incorporate all the remaining transitional deadlines in line with the original global agreement, even where they have not been able to meet the January 1, 2013 start date.
Hence, by the end of 2013, almost all Basel Committee jurisdictions will be implementing Basel III in accordance with the agreed timetable. This is an absolutely critical step towards strengthening the resilience of the global banking system." All Basel Committee members have reiterated their commitment to implement the globally-agreed reforms.