RBI extended the timeline for full implementation of Basel III norms by 2019

The Reserve Bank of India (RBI) extended the timeline for full implementation of the Basel III capital regulations by a year. Now the banks are required to comply with the Basel III norms by 31 March 2019 instead of 31 March 2018.

Some extended time was necessitated for banks to raise capital within the internationally agreed timeline for full implementation of the Basel III capital regulations.

RBI gave following reasons for the extension

In view of the implementation of Basel III Capital Regulations, banks need to improve and strengthen their capital planning processes.

While conducting the capital planning exercise, banks may consider the potential impact of the changing macro-economic conditions and the outcomes of periodic stress tests on the adequacy and composition of regulatory capital.

A forward looking capital planning process will enable banks to appropriately assess the level of capital needed to support their business strategies over the medium-term.

Industry-wide concerns have been expressed about the potential stresses on the asset quality and consequential impact on the performance / profitability of the banks. Accordingly, the transitional period for full implementation of Basel III Capital Regulations in India is extended.

Basel III

Basel III is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector.

In terms of Basel III capital regulations issued by the RBI, the Capital Conservation Buffer (CCB) will be implemented from March-end 2016 (against March-end 2015 earlier). Consequently, the Regulations will be fully implemented as on March-end 2019 (against March-end 2018 earlier).