RBI widens Basel-III-compliant asset base of banks

Ahead of the implementation of the stringent capital requirements under the Basel-III regime from 2019, the Reserve Bank on Wednesday amended a slew of previous regulations on the same, helping banks shore up their capital buffers and improve liquidity coverage ratios.

Accordingly, the new amendments widen the assets of banks such as the excess CRR; excess G-secs holdings in SLR; and also excess g-secs under marginal standing facility, which all would now be included in the stock of liquid assets without any limit as also without applying any haircut, the central bank said in a notification.

The regulator said liquid stock will also include marketable securities issued/guaranteed by foreign sovereigns which have only 0 per cent risk weight under the Basel II standardised approach for credit risk; actively traded repo or cash markets operations with zero risks, reserves held with foreign central banks in excess of the reserve requirement.

It said the RBI reserves would include banks' overnight deposits and term deposits with the central bank which are explicitly and contractually repayable on notice from the depositing bank or which constitute a loan against which the bank can borrow on a term or on an overnight basis but automatically renewable basis.

Other term deposits with the central bank are not eligible for this. However, if the term expires within 30 days, the term deposits could be considered as an inflow, the RBI circular added.

On Wednesday's circular amends some key sections of all the previous ones on the Basel norms, including the Master Circular on 'Basel III Capital Regulations' dated July 1, 2013.