As the deadline for implementing the Basel-III norms in Indian banks has arrived they are still preparing to solve the enigma of risk management for insuring more transparent and risk-free financial bases. According to the Reserve Bank of India, its association with the Basel 'Committee on Banking Supervision' dates back to the year 1997, as India was among the 16 non-member countries that were consulted while drafting of the core principles of the Basel I II and III norms. The RBI at that time became a member of the 'Core Principles Liaison Group' in 1998, and subsequently became a member of the 'Core Principles Working Group Committee on Capital'. Basel I norms focused on the teaching of credit and market risks faced by the banks. The Basel II norms brought into focus a larger number of risks requiring management by banks on a larger canvas. Besides the increase in the number of risks, to be managed banks are now beginning to focus on their inter-linkages with a view to achieve a more comprehensive risk management framework. The implementation of the Basel II norms, therefore, is being increasingly seen as a medium through which banks could constantly endeavor to upgrade their risk management systems in order to address the changing risks environments in which they operate. Basel II prescriptions have ushered in a transition from the traditional regulatory measure of Capital Adequacy to an evaluation of whether a bank had found the most efficient use of its capital to support its business portfolio i.e., a transition from capital adequacy to capital efficiency. In India, banks had been following the earlier Basel-I since 1993-94. In fact, regulators required a minimum Capital to Asset Ratio of 9 per cent, which was above the 8 per cent level as mentioned in the Basel-II accord. Despite being one of the fastest growing economies in the world, Indian banks are far behind their western counterparts in relation to their risk measurement and management techniques and managing their credit market and operational risks.
[...] This finding represents a change in the way banks view their expenditure on operational IT infrastructure, and a recognition by the banking community that the impact of Basel II extends far beyond compliance with a new set of industry regulations. When considering both a technology vendor with which to partner and software solutions to implement around Basel II compliance, the factors which participating banks ranked most highly were reliability, customer focus, ease of integration, and flexibility. Results indicate that the banks participating in the Oracle survey presented a positive perspective on the coming of Basel II, with most respondents commenting that the accord is likely to result in both better business decisions from more advanced information management and more efficient and effective allocation of capital. [...]
[...] An attempt on these guidelines was to assess the process of evolution of Basel standards in banking industry prescribed to be practiced by Basel abroad and subsequently posted in Indian banking scenario with respect to credit risk and market risk .The study also seeks to assess exclusively the Capital Adequate Ratio(CAR) with respect to certain other variables chosen as NPAs prevailing in bank, measures taken to control the effect on such loss assets and management of such loss assets by these banks. [...]
[...] Name of the Bank 2000-01 2001-02 2002-03 2003-04 2004-05 1 2 3 4 5 6 7 Foreign Banks in India 12.60 12.90 15.20 15.00 14.00 1. ABN-AMRO Bank N.V. 11.42 13.17 12.57 13.48 10.55 2. Abu Dhabi Commercial Bank Ltd. 10.05 10.42 10.14 14.22 14.38 3. American Express Bank Ltd. 9.59 10.71 10.93 10.74 10.87 4. Antwerp Diamond Bank 92.69 53.22 39.99 5. Arab Bangladesh Bank Ltd. 96.34 138.51 105.64 111.34 109.39 6. Bank International Indonesia 103.78 123.07 103.99 133.94 92.26 7. [...]
[...] Globalization and liberalizations of Economy and its impact on Banking Industry Economic developments in the recent years indicate a growing Resilience of the Indian economy. Even as the Indian economy was buffeted by exogenous shocks emanating from a below normal monsoon and record high international oil prices, overall GDP growth was almost 7 per cent during 2004-05. Effective macroeconomic management during the year ensured that India remained one of the fastest growing economies among emerging market economies in an environment of macroeconomic and financial stability. [...]
[...] It is observed that after the implementation of Basel Standards the level of non-performing assets (NPAs), both in gross and net terms, has declined. The capital adequacy ratio has also improved steadily. Reflecting the combined impact of increase in the capital position and improvement in asset quality, net NPLs to capital ratio, which is a worst-case scenario measure, declined steadily from a high level of 71.3 per cent at end-March 1999 to 22.8 per cent at end-March 2004 and further to 15.5 per cent by end-March 2005. [...]
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