RBI to issue guidelines for Basel III implementation

Apart from revising the definition of regulatory capital, Basel III is much wider in terms of its risk coverage clauses and encompasses measures to address systemic risks. The RBI observed that implementation of Basel III has thrown up significant challenges for both banks and banking supervisors alike

Mumbai: The Reserve Bank of India (RBI) has said Indian banks will adhere to the globally agreed timeline for implementation of Basel III norms and guidelines in this regard will be issued in the near future, reports PTI.

“The RBI is examining the Basel III regulations and will issue guidelines to the extent applicable for banks operating in India in due course of time,” the RBI’s annual report said.

Basel III is the new regulatory framework designed to correct the deficiencies in regulation that led to the global financial crisis of 2008.

It is to be noted that in the wake of financial crisis, the Basel Committee on Banking Supervision (BCBS) has initiated several post-crisis reform measures, mainly in terms of building on the Basel II capital adequacy framework.

Though Basel III can be viewed as a modification of the Basel II framework, it differs significantly in terms of its comprehensiveness, it said.

“The RBI would adhere to internationally agreed phase-in period starting in 1 January 2013, for implementation of Basel III,” it said.

Implementation of the Basel III norms is scheduled to commence from 1 January 2013, and has to be completed by 1 January 2019.

Apart from revising the definition of regulatory capital, it said Basel III is much wider in terms of its risk coverage clauses and encompasses measures to address systemic risks.

The RBI observed that implementation of Basel III has thrown up significant challenges for both banks and banking supervisors alike.

It said that availability of an adequate amount of capital, both in terms of quality and quantity, “provides significant comfort to begin implementation of the new framework” as per the time schedule fixed by the BCBS.

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FIEO urges RBI to open Libor-linked forex loans for exporters

FIEO president Ramu S Deora pointed out that amid the subdued global environment following the sovereign debt downgrades of the US and Japan and the debt crises in the Eurozone area, there is little to look forward to as far as exports from the MSME sector are concerned

Mumbai: The Federation of Indian Export Organisations (FIEO) has called on the Reserve Bank of India (RBI) to open a Libor-linked forex loan facility for exporters, especially small and medium businesses, to help them overcome a fund crunch, reports PTI.

Quoting the latest RBI data, FIEO president Ramu S Deora said rising interest rates have impacted credit offtake by 2 percentage points, with the credit growth rate slowing to 18.5%.

Mr Deora also pointed out that in spite of repeated hikes in policy rates by RBI, inflation is again gravitating toward double-digit levels.

The RBI has hiked short-term lending rates by a whopping 475 basis points since March, 2010 to tame inflation, which has been hovering above 9% since last December.

Mr Deora pointed out that amid the subdued global environment following the sovereign debt downgrades of the US and Japan and the worsening debt crises in the Eurozone area, there is little to look forward to as far as exports from the MSME sector are concerned.

Mr Deora also warned that going forward, export growth will slow down while imports are likely to remain at the same level, further widening the already high trade deficit.

In these circumstances, he urged the government to cap interest rates for MSME exports at 7% with the introduction of interest subvention for exports, besides monitoring of credit offtake for exports and providing information on the same in its monetary policy review regularly.

He also called for apportioning more funds to the Export Credit Guarantee Corporation, besides increasing the interest on Exchange Earner’s Foreign Currency Accounts to offset rising borrowing and input and raw materials costs.

It is understood that the ongoing dollar supply crunch in Europe is pushing up the cost of obtaining the American currency through the swap market in Asian financial centres, impacting MSMEs that are looking for dollar loans.

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Govt may face hurdles in achieving FY11-12 borrowing target: RBI

The tight liquidity conditions would make market borrowing difficult for the government. Also, the private sector might face some problems, as there would be less funds available in the market for them

New Delhi: The government could face difficulties in managing its borrowing programme for the current fiscal amid the prevailing tight liquidity conditions as banks hold a higher proportion of government securities, reports PTI quoting the Reserve Bank of India (RBI).

“Notwithstanding the relatively lower budgeted market borrowings of the central government in 2011-12, managing the borrowing programme would be a challenge in view of tight liquidity conditions and the high level of excess Statutory Liquidity Ratio (SLR) holdings of the banks,” the Reserve Bank said in its Annual Report.

Gross government borrowings in the current fiscal (2011-12) are pegged at Rs4.17 lakh crore, down from Rs4.37 crore in 2010-11.

Of this, the government is scheduled to borrow Rs2.50 lakh crore in the first half, as against Rs2.84 lakh crore in the corresponding April-September period last year.

The tight liquidity conditions would make market borrowing difficult for the government. Also, the private sector might face some problems, as there would be less funds available in the market for them.

Moreover, the higher SLR of banks would restrict them from buying bonds floated by the government.

The apex bank also said that the government’s ability to rein in the fiscal deficit would influence the conduct of the market borrowing programme in the current fiscal.

The government has estimated the fiscal deficit target at 4.6% in the current fiscal, down from 4.7% last year.

“The conduct of the market borrowing programme will be influenced by the ability of the government to rein in the fiscal deficit and its financing by way of market borrowings,” the report added.

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