Abstract
In this paper, an attempt is made to estimate credit risk capital charge for public sector and private sector banks in India for the period from 2007–2008 to 2013–2014 under advanced internal rating based (AIRB) approach using Basel risk weight formula. The analysis brings out that credit risk capital charges would be higher for the banks with high default risk and recovery risk and vice-versa. The inter-sector comparison indicates that a substantial proportion of the overall additional capital requirement for credit risk would falls on the public sector banks. Hence, banks in this sector requires improvement in appraisal system and loan recovery mechanism to reduce burden of additional credit risk capital charges and for better-quality performance on risk adjusted basis.
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