Banks may need 5 lakh crore towards Basel III
In the wake of Basel III capital regulations declared by the RBI, the Indian banks would require Rs 3,90,000-5,00,000 crore capital over the next 6 years.
As per initial estimates by bankers and rating agencies, out of this , the need for common equity would be Rs 1,30,000-2,00,000 crore, additional Tier-I capital of Rs 1,90,000 crore and for Tier-II Rs 1,00,000 crore.
Of the common equity requirement, a sizeable part of around 80% relates to public sector banks . Of the PSBs’ total equity requirement, the government’s share would be Rs 30,000-80,000 crore, going by the finance ministry’s present stance of maintaining 58% shareholding in PSBs.
Although the equity target may appear easy at first glance, it may not prove to be so ultimately, given that the RBI has also introduced loss-absorption features in additional Tier I capital instruments. Given that such features make the instruments quite complex and even risky, the RBI has not allowed banks to raise Tier I capital via retail investors.
What is Tier-I Capital and Tier-II Capital?
What are Risk Weighted Assets?
What are the three pillars of Basel-III?