The Reserve Bank of India (RBI), on Wednesday, issued the final guidelines for implementation of Basel III capital regulation in India, which would be effective from January 1, 2013, in a phased manner.

The Basel III capital ratios will be fully implemented on March 31, 2018.

Banks have to maintain Tier I capital, or core capital, of at least 7 per cent of their risk weighted assets on an ongoing basis.

Under the existing capital adequacy guidelines based on the Basel II framework, banks are required to maintain Tier I capital of at least 6 per cent of their risk weighted assets.

The total capital ratio, including Tier I and Tier II, must be at least 9 per cent, unchanged from the current requirement, the RBI said in a statement, compared with the Basel III minimum requirement of 8 per cent.

“The capital requirements for the implementation of Basel III guidelines may be lower during the initial periods and higher during the later years.

“While undertaking the capital planning exercise, banks should keep this in view,” RBI said in a notification to banks.

For the financial year ending March 31, 2013, banks will have to disclose the capital ratios computed under the existing guidelines (Basel II) on capital adequacy as well as those computed under the Basel III capital adequacy framework, RBI added.

The Basel Committee on Banking Supervision (BCBS) issued a comprehensive reform package entitled ‘Basel III: A global regulatory framework for more resilient banks and banking systems' in December 2010, with the objective to improve the banking sector's ability to absorb shocks arising from financial and economic stress.

A revised version of this document (Basel III) was issued in June 2011

This will amend certain provisions of existing Basel II framework, in addition to introducing some new concepts and requirements.

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