PSU banks will require Rs 4.05-4.25 trillion to meet Basel III norm, estimates RBI

MUMBAI: The Reserve Bank of India has estimated that private and public sector banks will require capital to the tune of Rs 4.75--5 trillion by 2018 in order to adhere to the Basel III - the global regulatory standard on bank capital adequacy ratio. This is indicated by the RBI in it annual report released today.

The banking regulator has said that government owned banks will require capital in the tune of Rs 4.05 to Rs 4.25 trillion. OF this, PSU banks will require Rs 1.4-1.5 trillion in form of common equity and Rs 2.65 to 2.75 trillion in form of non-equity capital.

These estimates do not include internal accruals - profits earned by banks that is added to the capital- earned during the period Basel III is implemented.

The capital requirement for private banks is expected to be in the range of Rs 700 to 750 billion which again does not includes the profits they would earn while it Basel III is implemented.

RBI has said that these projections are based on the conservative assumption that banks will show a uniform growth of 20% per annum.

RBI has also noted that since banks would anyway have to raise capital to adhere to the Basel II accord, the incremental equity requirement for government owned banks due to enhanced Basel III capital ratio is expected to be to the turn of Rs 750-800 billion.

Under Basel II banks have to maintain capital adequacy ratio (CAR) of 9% which includes tier I capital - core capital like equity and reserves and tier II capital. Under the Basel III accord banks have maintain Car of 8% wherein the tier I capital should be minimum 7%. However, RBI has asked Indian banks to miantain Car of 9%.