RBI’S ANNUAL REPORT Banks will Need 5 Lakh cr to Comply with Basel III

PSU banks will require . 4.25 lakh cr and pvt banks will need . 75,000 cr to adhere to new norms, RBI says     The Reserve Bank of India has estimated that private and public sector banks will require capital of . 4.75–5 trillion by 2018 to be compliant with Basel III, the global regulatory standard on bank capital adequacy ratio.  The banking regulator, in it annual report released on Thursday, said government-owned banks will require capital of . 4.05 lakh crore to . 4.25 lakh crore. They will need . 1.4–1.5 lakh crore in the form of common equity and . 2.65–2.75 lakh crore in form of non-equity capital. These estimates do not include internal accruals — profits earned by banks that are added to the capital earned.  The capital requirement for private banks is expected to be in the range of . 70,000 crore to . 75,000 crore, which again does not include profits they would earn while Basel III is implemented.  RBI said these projections are based on the conservative assumption that banks will show a uniform growth of 20% per annum.  RBI has also noted that since banks would anyway have to raise capital to adhere to the Basel II accord, the incremental equity requirement for governmentowned banks to stick to enhanced Basel III capital ratio is expected to be . 750–800 billion.  Under Basel II, banks have to maintain a capital adequacy ratio (CAR) of 9%, which includes tier-I capital — core capital like equity and reserves — and tier-II capital. Under the Basel III accord, banks have to maintain a CAR of 8% with a minimum 7% of tier-I capital. The RBI has, however, asked banks to maintain a CAR of 9%.