Compliance of Basel III Norms: Comparison of selected Nationalised, Private and Foreign Banks

Abstract

Paper compares compliance of BASEL III norms as given by RBI by selected nationalized, private and foreign banks. There are three categories of banks in India-Public, Private and Foreign banks. Nine banks, three in each category were selected. Data related to 3 factors of Basel III norms i.e., Capital Adequacy requirements, Supervisory Review and Market Discipline for past 10 years i.e.3 years for Basel I norms, 6 years before and 3 years after the adoption of Basel III norms was collected. It was found out that significant difference was observed in case of Tier 1 capital under Basel II and Basel III norms because the capital of the banks had to be raised in order to meet the requirements of new capital adequacy norms. Significant difference was also observed in case of CRAR of the nationalised and private sector banks. Total capital adequacy ratio of the banks was mainly affected by risk weighted assets of the banks. The more the risk weighted assets of the bank the higher is the capital to risk weighted assets ratio (CRAR). The credit risk capital requirements of private sector banks, market risk capital requirements of nationalised banks and operational risk capital requirements of private sector banks witnessed significant differences under Basel II norms and Basel III norms.