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finance | IST

Parliamentary Panel expresses concern over capital adequacy norms for banks

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A Parliamentary Standing Committee on Finance has expressed apprehension over the capital adequacy ratio (CAR) mandate set for the banks by the Reserve Bank of India.

A Parliamentary Standing Committee on Finance has expressed concern over the capital adequacy ratio (CAR) mandate set for the banks by the Reserve Bank of India.
The CAR, also known as capital-to-risk weighted assets ratio (CRAR), is used to protect depositors and promote stability and efficiency of financial systems around the world.
According to the RBI’s capital adequacy norms, banks are required to maintain the minimum CRAR at 9 percent (higher than the Basel-III requirements of 8 percent). On top of this, they were mandated to keep a capital conservation buffer of 2.5 percent in phases by March 2019.
"The committee finds that CRAR norm of 11.5 percent by the end of 2018-19 under the Basel III by RBI is higher by 3.5 percent than the CRAR required under global Basel II framework," the committee said in a report on Thursday.
The committee noted that the CRAR norm of 11.5 percent is unrealistic and unwarranted.
The finance ministry and the central bank have differed on capital adequacy norms for banks. The ministry wants the stipulation aligned with the international practices as well, so that banks are able to lend more and spur economic growth.
According to the report, stipulated additional capital requirement if waived will release approximately Rs 5.34 lakh crore.
 
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