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India should transit to Basel III norms- RBI

RBI’s position is that India should transit to Basel III norms, says RBI ED N. S. Vishwanathan. “Our position is that India should transit to Basel III because of several reasons. By far the most important reason is that as India integrates with the rest of the world, as increasingly Indian banks go abroad and foreign banks come on to our shores, we cannot afford to have a regulatory deviation from global standards. Any deviation will hurt us both by way of perception and also in actual practice”, he said.

“The ‘perception’ of a lower standard regulatory regime will put Indian banks at a disadvantage in global competition, especially because the implementation of Basel III is subject to a “peer group” review whose findings will be in the public domain.”

He said that deviation from Basel III will also hurt India in actual practice.

“We have to recognize that Basel III provides for improved risk management systems in banks. It is important that Indian banks have the cushion afforded by these risk management systems to withstand shocks from external systems, especially as they deepen their links with the global financial system going forward”, he said.

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