Basel Norms in India

Technical Paper – Course on General Management and Communication Skills, Institute of Chartered Accountants of India - Batch 129

Basel II Implications on Indian Banks

Group Members Rahul Sharma (ERO0097549) Abhishek Tulsyan (CRO0137558) Sikha Kedia (ERO0105399) Gourav Modi (ERO0016925) Praveen Didwania (ERO0110131)

Index of Contents
Topics Page No.

I.

Introduction
A. B. C. D. E. F. G. Background Functions of Basel Committee The Evolution to Basel II – First Basel Accord Capital Requirements and Capital Calculation under Basel I Criticisms of Basel I New Approach to Risk Based Capital Structure of Basel II First Pillar : Minimum Capital Requirement Types of Risks under Pillar I The Second Pillar : Supervisory Review Process The Third Pillar : Market Discipline 3 3 3 3 3 4 4

II.

The Three Pillar Approach
A. B. C. D. 5 5 6 6 7 7 7

III.

Capital Arbitrage and Core Effect of Basel II
A. Capital Arbitrage B. Bank Loan Rating under Basel II Capital Adequacy Framework C. Effect of Basel II on Bank Loan Rating

IV.

Basel II in India
A. Implementation C. Impact on Indian Banks D. Impact on Various Elements of Investment Portfolio of Banks E. Impact on Bad Debts and NPA’s of Indian Banks D. Government Policy on Foreign Investment E. Threat of Foreign Takeover 8 8 9 10 10 10

V.

Conclusion
A. SWOT Analysis of Basel II in Indian Banking Context B. Challenges going ahead under Basel II 11 11 13 13

VI. VII.

References The Technical Paper Presentation Team

2

I.

Introduction:

A. Background
Basel II is a new capital adequacy framework applicable to Scheduled Commercial Banks in India as mandated by the Reserve Bank of India (RBI). The Basel II guidelines were issued by the Basel Committee on Banking Supervision that was initially published in June 2004. The Accord has been accepted by over 100 countries including India. In April 2007, RBI published the final guidelines for Banks operating in India. Basel II aims to

References: 1. The Evolution to Basel II by Donald Inscoe, Deputy Director, Division of Insurance and Research, US Federal Deposit Insurance Corporation. 2. Basel II – Challenges Ahead of the Indian Banking Industry by Jagannath Mishra and Pankaj Kumar Kalawatia. 3. Basel II Norms and Credit Ratings by CA Sangeet Kumar Gupta. 4. The Business Line Magazine. 5. The Chartered Accountant – Journal of the Institute of Chartered Accountants of India. 6. www.bis.org 7. www.rbi.org.in 8. www.wikipedia.org 9. www.google.com VII. The Technical Paper Presentation Team Name of Member Email ID’s [e-mail] [e-mail] [e-mail] [e-mail] [e-mail] 1. Rahul Sharma 2. Abhishek Tulsyan 3. Sikha Kedia 4. Gourav Modi 5. Praveen Didwania 13