NEW DELHI: Banks in India, reeling under stress due to demonetisation and the GST rollout, would need more time to launch Basel-III norms, according to a new report. Therefore, it makes sense to delay the implementation of the global risk norms, the report by SBI Ecowrap noted.
It added that an extended timeline to meet the capital needs under the norms would provide the necessary breather to banks to lend more while they grapple with several issue. “We believe that Indian banking sector needs some time to assimilate the impact of past three structural changes (demonetisation, GST implementation and RERA) before facing the new ones,” said the SBI Ecowrap in the report - ‘Timing Future Reforms in India’.
“Even as we acknowledge the positive impact of such reforms, we are convinced that perhaps the Indian banking sector deserves a small interregnum so as to meaningfully concentrate on issues related to financial inclusion, asset quality and credit growth,” it noted.
Going by the country-wise implementation status of Basel-III standards, India is largely compliant with the risk-based capital and liquidity coverage ratio (LCR) norms ahead of most of the countries as some of them.
According to the Reserve Bank direction, the Basel-III capital regulation is being implemented from April 1, 2013 in India in phases, and it will be fully adopted as on March 31, 2019. The banking sector, the key driver of the Indian economy, is currently going through challenging times due to low credit growth, deterioration in asset quality and low profitability, it said, making the case for the delay.