A Basel Norms Compliance in Indian Banks

Abstract

Purpose: The object of this paper is to examine the phased implementation of Basel standards Basel-I, and Basel II and a detailed analysis of Basel-III since 1994 and analyze the challenges encountered throughout this process.

Methodology: A range of sources, such as journals, websites, studies, and publications was used to gather information. To offer a thorough summary of the subject, details have been considered and combined.

Findings: The Study has revealed that the formulation of Basel norms primarily considers Organisation for Economic Cooperation and Development (OECD) countries rather than developing countries. Consequently, banks in developing countries may experience a significant decline in return on capital (ROA) due to these new standards. India is currently at a crossroads, striving to balance the achievement of social objectives such as financial inclusion with the creation of a resilient financial system capable of absorbing financial shocks.

Originality: The Basel Committee on Banking Supervision (BCBS) introduced a proposed accord in 1988, which was later adopted in India in April 1994. Over time, India implemented Basel-II and Basel-III norms in 2009 and 2013 respectively. These stringent capital adequacy requirements are for Indian banks, as their capital needs are projected to increase by the present.

Utilitarian Implication: The crisis prompted to strengthening of banks worldwide by implementing a comprehensive regulatory framework to calculate Credit Risk risk-weighted asset Ratio (CRAR), considering credit market and operational risks. Indian banks have been adhering to Basel-III norms since 2013.

Research Type: Descriptive Quantitative Study.