ANALYZING CAPITAL REGULATIONS OF PUBLIC SECTOR BANKS WITH REFERENCE TO BASEL III NORMS.
Abstract
Implementation of Basel III norms is a strong step in streamlining the banking practices which would provide greater stability and better resilience to face financial storms. A well-capitalized banking system is a prerequisite for stable economic growth. Nowadays, Indian banking industry is facing a dramatic stage of financial reforms and various regulatory measures are being announced by the government because the winds of regulatory reforms are blowing across the globe. In case of banking business, the survival of banks is generally based on the adequate capital because in absence of sufficient capital, banks may face the bankruptcy. Therefore, banks always keep adequate level of capital to maintain liquidity. A bank with higher capital adequacy ratio is considered safe and capable to meet its obligations. The prudential regulations on capital adequacy of banks have traditionally been a matter of concern. In the wake of financial reforms in India, a capital to risk weighted asset (CRAR) system was adopted by Indian commercial banks The regulatory framework had been designed by BCBS in form of Basel norms. The level of CAR has been ascertained by the financial regulators to provide a cushion to soak up the unexpected losses and risks because an efficient and stable banking system is essential for productivity of the economy. Thus, the present study intends to measure the consistency of capital adequacy ratio of Indian public sector banks. The results conclude that Indian public-sector banks are stronger and stable due to high capital ratio recorded by all banks indicating that Indian public-sector banks are positively moving towards the implementation of Basel III norms.
Keyword : Basel III, Capital regulations, capital adequacy ratio, Indian public sector banks.
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