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Regular Study - Basel III

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Important
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List of
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Dept of
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Basel III Capital Regulations are being implemented

in India with effect from April 1, 2013 in a phased
manner.

RBI
IIBF

I request all of you to go through the Amended

Master Circular - Basel III (01 July 2015) here :

IRDA

"https://rbidocs.rbi.org.in/rdocs/notification/PDFs/58
BS09C403D06BC14726AB61783180628D39.PDF"

SEBI

Revised Framework for Leverage Ratio for

Implementation of Basel III Capital Regulations in
India can be better explained under the following
headings.
Rationale and Objective
Definition, Minimum Requirement and Scope of
Application of the Leverage Ratio
Capital Measure
Exposure Measure
Transitional arrangements
Disclosure requirements

BCSBI
CIBIL
Banking
and
Insurance
Ministry
of Finance

They can be better understood in detail by going

through "http://icmai.in/upload/pd/RBI-Circular09012015.pdf". We can also discuss in details if
members wants to.

Customs

Just a recollection of Basel III

developments till now :

Tax
Departmen
t

Basel III released in December, 2010 is the third in

the series of Basel Accords. These accords deal with
risk management aspects for the banking sector. In
a nut shell we can say that Basel III is the global
regulatory standard (agreed upon by the members
of the Basel Committee on Banking Supervision) on
bank capital adequacy, stress testing and market
liquidity risk. (Basel I and Basel II are the earlier
versions of the same, and were less stringent)
According to Basel Committee on Banking
Supervision "Basel III is a comprehensive set of
reform measures, developed by the Basel
Committee on Banking Supervision, to strengthen
the regulation, supervision and risk management of
the banking sector".
Thus, we can say that Basel III is only a continuation
of effort initiated by the Basel Committee on
Banking Supervision to enhance the banking
regulatory framework under Basel I and Basel II.
This latest Accord now seeks to improve the banking
sector's ability to deal with financial and economic
stress, improve risk management and strengthen
the banks' transparency.

Excise &

Income

Planning
Commissio
n
NSE
BSE

Objectives / aims of the Basel III measures

Basel III measures aim to:
improve the banking sector's ability to absorb
shocks arising from financial and economic stress,
whatever the source
improve risk management and governance
strengthen banks' transparency and disclosures.
Thus we can say that Basel III guidelines are aimed
at to improve the ability of banks to withstand
periods of economic and financial stress as the new
guidelines are more stringent than the earlier
requirements for capital and liquidity in the banking
sector.
How Does Basel III Requirements Will Affect
Indian Banks :
The Basel III which is to be implemented by banks in
India as per the guidelines issued by RBI from time
to time, will be challenging task not only for the
banks but also for GOI. It is estimated that Indian
banks will be required to rais Rs 6,00,000 crores in
external capital in next nine years or so i.e. by 2020
(The estimates vary from organisation to
organisation). Expansion of capital to this extent
will affect the returns on the equity of these banks
specially public sector banks. However, only
consolation for Indian banks is the fact that
historically they have maintained their core and
overall capital well in excess of the regulatory
minimum.
The basic structure of Basel III remains
unchanged with three mutually reinforcing
pillars.
Pillar 1 : Minimum Regulatory Capital Requirements
based on Risk Weighted Assets (RWAs) : Maintaining
capital calculated through credit, market and
operational risk areas.
Pillar 2 : Supervisory Review Process : Regulating
tools and frameworks for dealing with peripheral
risks that banks face.
Pillar 3: Market Discipline : Increasing the
disclosures that banks must provide to increase the
transparency of banks
Major Changes Proposed in Basel III over

earlier Accords i.e. Basel I and Basel II

(a) Better Capital Quality : One of the key
elements of Basel 3 is the introduction of much
stricter definition of capital. Better quality capital
means the higher loss-absorbing capacity. This in
turn will mean that banks will be stronger, allowing
them to better withstand periods of stress.
(b) Capital Conservation Buffer: Another key
feature of Basel iii is that now banks will be required
to hold a capital conservation buffer of 2.5%. The
aim of asking to build conservation buffer is to
ensure that banks maintain a cushion of capital that
can be used to absorb losses during periods of
financial and economic stress.
(c) Countercyclical Buffer: This is also one of the
key elements of Basel III. The countercyclical buffer
has been introduced with the objective to increase
capital requirements in good times and decrease the
same in bad times. The buffer will slow banking
activity when it overheats and will encourage
lending when times are tough i.e. in bad times. The
buffer will range from 0% to 2.5%, consisting of
common equity or other fully loss-absorbing capital.
(d) Minimum Common Equity and Tier 1
Capital Requirements : The minimum
requirement for common equity, the highest form of
loss-absorbing capital, has been raised under Basel
III from 2% to 4.5% of total risk-weighted assets.
The overall Tier 1 capital requirement, consisting of
not only common equity but also other qualifying
financial instruments, will also increase from the
current minimum of 4% to 6%. Although the
minimum total capital requirement will remain at the
current 8% level, yet the required total capital will
increase to 10.5% when combined with the
conservation buffer.
(e) Leverage Ratio:
A review of the financial
crisis of 2008 has indicted that the value of many
assets fell quicker than assumed from historical
experience. Thus, now Basel III rules include a
leverage ratio to serve as a safety net. A leverage
ratio is the relative amount of capital to total assets
(not risk-weighted). This aims to put a cap on
swelling of leverage in the banking sector on a
global basis. 3% leverage ratio of Tier 1 will be
tested before a mandatory leverage ratio is
introduced in January 2018.

(f) Liquidity Ratios: Under Basel III, a framework

for liquidity risk management will be created. A new
Liquidity Coverage Ratio (LCR) and Net Stable
Funding Ratio (NSFR) are to be introduced in 2015
and 2018, respectively.
(g) Systemically Important Financial
Institutions (SIFI) : As part of the macroprudential framework, systemically important banks
will be expected to have loss-absorbing capability
beyond the Basel III requirements. Options for
implementation include capital surcharges,
contingent capital and bail-in-debt.

----------------------------------------Basel III is a comprehensive set of reform measures,

developed by the Basel Committee on Banking
Supervision, to strengthen the regulation,
supervision and risk of the banking sector.
The Basel Committee is the primary global standardsetter for the prudential regulation of banks and
provides a forum for cooperation on banking
supervisory matters. Its mandate is to strengthen
the regulation, supervision and practices of banks
worldwide with the purpose of enhancing financial
stability.
The Committee reports to the Group of Governors
and Heads of Supervision (GHOS). The Committee
seeks the endorsement of GHOS for its major
decisions and its work programme.
The Committee's members come from Argentina,
Australia, Belgium, Brazil, Canada, China, European
Union, France, Germany, Hong Kong SAR, India,
Indonesia, Italy, Japan, Korea, Luxembourg, Mexico,
the Netherlands, Russia, Saudi Arabia, Singapore,
South Africa, Spain, Sweden, Switzerland, Turkey,
the United Kingdom and the United States.
The Basel III reform measures aim to:

Improve the banking sector's ability to absorb shocks arising

from financial and economic stress, whatever the source

Improve risk management and governance

Strengthen banks' transparency and disclosures.

The reforms target:

a. Bank-level, or microprudential, regulation, which

will help raise the resilience of individual banking

institutions to periods of stress.
b. Macroprudential, system wide risks that can build
up across the banking sector as well as the
procyclical amplification of these risks over time.
These two approaches to supervision are
complementary as greater resilience at the
individual bank level reduces the risk of system wide
shocks.
From 1993 to 2008 the total assets of a sample of
what we call global systemically important banks
saw a twelve-fold increase (increasing from $2.6
trillion to just over $30 trillion). But the capital
funding these assets only increased seven-fold,
(from $125 billion to $890 billion). Put differently,
the average risk weight declined from 70% to below
40%.
The problem was that this reduction did not
represent a genuine reduction in risk in the banking
system.
One of the main reasons the economic and financial
crisis became so severe was that the banking
sectors of many countries had built up excessive on
and off-balance sheet leverage. This was
accompanied by a gradual erosion of the level and
quality of the capital base.
At the same time, many banks were holding
insufficient liquidity buffers.
The banking system therefore was not able to
absorb the resulting systemic trading and credit
losses nor could it cope with the reintermediation of
large off-balance sheet exposures that had built up
in the shadow banking system.
The crisis was further amplified by a procyclical
deleveraging process and by the interconnectedness
of systemic institutions through an array of complex
transactions.
During the most severe episode of the crisis, the
market lost confidence in the solvency and liquidity
of many banking institutions. The weaknesses in the
banking sector were rapidly transmitted to the rest
of the financial system and the real economy,
resulting in a massive contraction of liquidity and
credit availability.
Ultimately the public sector had to step in with
unprecedented injections of liquidity, capital support
and guarantees, exposing taxpayers to large losses.
The effect on banks, financial systems and
economies at the epicentre of the crisis was

immediate. However, the crisis also spread to a

wider circle of countries around the globe. For these
countries the transmission channels were less
direct, resulting from a severe contraction in global
liquidity, cross-border credit availability and demand
for exports.
Given the scope and speed with which the recent
and previous crises have been transmitted around
the globe as well as the unpredictable nature of
future crises, it is critical that all countries raise the
resilience of their banking sectors to both internal
and external shocks.
The G20 Leaders at the Seoul Summit endorsed the
Basel III framework and the Financial Stability
Boards (FSB) policy framework for reducing the
moral hazard of systemically important financial
institutions (SIFIs), including the work processes and
timelines set out in the report submitted to the
Summit.
SIFIs are financial institutions whose disorderly
failure, because of their size, complexity and
systemic interconnectedness, would cause
significant disruption to the wider financial system
and economic activity.
We read in the final G20 Communique:
"We endorsed the landmark agreement reached by
the Basel Committee on the new bank capital and
liquidity framework, which increases the resilience
of the global banking system by raising the quality,
quantity and international consistency of bank
capital and liquidity, constrains the build-up of
leverage and maturity mismatches, and introduces
capital buffers above the minimum requirements
that can be drawn upon in bad times.
The framework includes an internationally
harmonized leverage ratio to serve as a backstop to
the risk-based capital measures.
With this, we have achieved far-reaching reform of
the global banking system.
The new standards will markedly reduce banks'
incentive to take excessive risks, lower the
likelihood and severity of future crises, and enable
banks to withstand - without extraordinary
government support - stresses of a magnitude
associated with the recent financial crisis.
This will result in a banking system that can better
support stable economic growth.
We are committed to adopt and implement fully
these standards within the agreed timeframe that is

consistent with economic recovery and financial

stability.
The new framework will be translated into our
national laws and regulations, and will be
implemented starting on January 1, 2013 and fully
phased in by January 1, 2019."
To ensure visibility of the implementation of reforms,
the Basel Committee has been regularly publishing
information about members adoption of Basel III to
keep all stakeholders and the markets informed, and
to maintain peer pressure where necessary.
It is especially important that jurisdictions that are
home to global systemically important banks (GSIBs) make every effort to issue final regulations at
the earliest possible opportunity.
But simply issuing domestic rules is not enough to
achieve what the G20 Leaders asked for: full, timely
and consistent implementation of Basel III. In
response to this call, in 2012 the Committee
initiated what has become known as the Regulatory
Consistency Assessment Programme (RCAP).
The regular progress reports are simply one part of
this programme, which assesses domestic
regulations compliance with the Basel standards,
and examines the outcomes at individual banks.
The RCAP process will be fundamental to ensuring
confidence in regulatory ratios and promoting a
level playing field for internationally-operating
banks.
It is inevitable that, as the Committee begins to
review aspects of the regulatory framework in far
more detail than it (or anyone else) has ever done in
the past, there will be aspects of implementation
that do not meet the G20s aspiration: full, timely
and consistent.
The financial crisis identified that, like the standards
themselves, implementation of global standards was
not as robust as it should have been.
This could be classed as a failure by global standard
setters.
To some extent, the criticism can be justified not
enough has been done in the past to ensure global
agreements have been truly implemented by
national authorities.
However, just as the Committee has been
determined to revise the Basel framework to fix the
problems that emerged from the lessons of the
crisis, the RCAP should be seen as demonstrating
the Committees determination to also find

implementation problems and fix them.

-----------------------------------------Basel III is divided in two main areas:

Regulatory capital
Asset and liability management

AREA 1: Regulatory Capital

Banks shall progressively reach a minimum solvency
ratio of 7% as of 2019:
Solvency ratio = (Regulatory Capital) / (RiskWeighted Assets). [RWA = Risk-Weighted Assets]
The minimum requirement used to be 2% prior to
Basel 3, with many national banking authorities
requiring much more leading to that most banks
used to have a Tier 1 ratio exceeding 7%
According to the Basel III impact study, at the end of
2009, the average solvency ratio (Core Tier One) of
large banks was 11.1%
So, what is the problem, if banks already exceed the
minimum solvency ratio set by Basel III? The devil is
in the details and here is where we find the
problems caused to the corporate sector:
The definitions of the Regulatory Capital and the
RWA have changed:
Calculated according to the Basel III definitions, the
Core Tier One ratio would have been 5.7% instead of
11.1% according to the old definitions
The 87 large banks who answered the impact
study would have been short of 600bn of equity at
the end of 2009. New stress tests are disclosed
regularly and the shortcomings differ, but they are
still there. This means that banks will either/or have
to raise more capital or decrease its present lending,
which will create a crowding out of capital in the
financial markets either way.
There are new definitions of core equity leading to
that it is reduced with up to 40% for large banks
increased the crowding out effects even further.
Major changes in the definition:
Some financial instruments are not any longer
eligible as Regulatory Capital
Intangibles and deferred tax assets shall be
deducted from the Regulatory Capital
There are changes in how RWA is calculated in
average increasing it with 23%. Major changes
include:
Sharp increase of RWA amounts from trading

activities (stress tests on value at risk,

securitisations) leading to many banks decreasing
the trading leading to fewer banks quoting prices.
This has already led to reduced liquidity and
increased costs and risks for corporates in managing
its financial exposure from import and export etc
This encourages particularly banks to perform their
swaps through clearing houses
This may weight on complex derivatives businesses
Loan portfolios require being marked-to-market even
though it is not required by accounting standards.
This increases pro-cyclicality
Basel III introduces a Leverage Ratio such that the
amounts of assets and commitments should not
represent more than 33 times the Regulatory
Capital, regardless of the level of their riskweighting and of the credit commitments being
drawn down or not
The Financial Stability Board recommended in July
2011 that the 29 identified systemically important
financial institutions have a Core Tier 1 ratio
increased between 1% and 2.5%. Of course these
SIFIs are the main large corporates banking
counterparts. This provision has been enacted by
the G20 in November 2011.
The European Commission has added:
Minimum solvency ratio shall be 9% for the EU
banks (instead of 7%)
The EU banks shall comply with this level in June
2012 (instead of 2019)
AREA 2: Assets and liabilities management
Banks will have to comply with two new ratios:
Liquidity Coverage Ratio (LCR)
Net Stable Funding Ratio (NSFR)
LCR: high-quality highly-liquid assets available must
exceed the net cash outflows of the next 30 days:
High-quality highly-liquid assets:
Level 1 assets: Recognized at 100%: cash, sovereign
debt of countries weighted at 0% (which include the
PIIGS as they are part of the Eurozone), deposit at
central bank. Level 1 assets shall account for at
least 60% of the high-quality highly liquid assets
Level 2A assets: Recognized at 85% and must not
represent more than 40% of the assets: sovereign
debt weighted at 20% (countries rated below AA-),
corporate bonds and covered bonds rated at least
AA-

Level 2B assets (introduced Jan, 2013): non-financial

corporate bonds rated between BBB- and A+, with a
hair cut of 50%; certain unencumbered equities,
with a hair cut of 50%; and certain residential
mortgage-backed securities (RMBS), with a hair cut
of 25%.
The Level 2B assets will not be eligible for more than
15% of the high-quality highly liquid assets and a
total level 2 assets will not be eligible for more than
40% of the high-quality highly liquid assets
Changes from January 2013 provide:
To some extent, lesser cost of carry for banks on
high-quality highly-liquid assets but still limited
because of the 50% hair cut and 15% limitation
Improvement for the financing of investment graded
companies (BBB and above) by banks through
bonds, which will remain in competition with
residential mortgage-backed securities (RBMS) with
lesser hair cut and whose markets is restored with
these new provisions
Level 1 assets remain at least 60% of the highquality highly-liquid assets, which means that
concentration risks and cost of carry remain.
Net cash outflows = cash outflows cash inflows
NSFR: long-term financial resources must exceed
long-term commitments (long term = and more than
1 year):
Stable funding:
equity and any liability maturing after one year
90% of retail deposits
50% of deposits from non-financial corporates and
public entities
Long-term uses:
5% of long-term sovereign debt or equivalent with
0%-Basel II Standard approach risk-weighting (see
comment above for LCR) with a residual maturity
above 1 year
20% of non-financial corporate or covered bonds at
least rated AA- with a residual maturity above 1
year
50% of non-financial corporate or covered bonds at
least rated between A- and A+ with a residual
maturity above 1 year
50% of loans to non-financial corporates or public
sector
65% of residential mortgage with a residual maturity
above 1 year
5% of undrawn credit and liquidity facilities
----------------------------------------

RBI Guidelines for

Implementation of Basel III
Guidelines
Back Ground for Basel III :
Earlier guidelines were known as Basel I and Basel II
accords. Later on the committee was expanded to
include members from nearly 30 countries ,
including India. Inspite of implementation of Basel I
and II guidelines, the financial world saw the worst
crisis in early 2008 and whole financial markets
tumbled. One of the major debacles was the fall of
Lehman Brothers. One of the interesting comments
on the Balance Sheet of Lehman Brothers read :
Whatever was on the left-hand side (liabilities) was
not right and whatever was on the right-hand side
(assets) was not left. Thus, it became necessary to
re-visit Basel II and plug the loopholes and make
Basel norms more stringent and wider in scope.
BCBS, through Basel III, put forward norms aimed at
strengthening both sides of balance sheets of banks
viz.
(a) enhancing the quantum of common equity;
(b) improving the quality of capital base;
(c) creation of capital buffers to absorb shocks;
(d) improving liquidity of assets;
(e) optimising the leverage through Leverage Ratio;
(f) creating more space for banking supervision by
regulators under Pillar II; and
(g) bringing further transparency and market
discipline under Pillar III.
Thus, Basel III norms were released by BCBS and
individual central banks were asked to implement
these in a phased manner. RBI (India's central bank)
too issued draft guidelines in the initial stage and
then came up with the final guidelines.
Over View f the RBI Guidelines for Implementation of
Basel III guidelines :
The final guidelines have been issued by Reserve
Bank of India for implementation of Basel 3
guidelines on 2nd May, 2012. Full detailed
guidelines can be downloaded from RBI website, by
clicking on the following link : Implementation of
Base III Guidelines. Major features of these
guidelines are :
(a) These guidelines would become effective from

January 1, 2013 in a phased manner. This means

that as at the close of business on January 1, 2013,
banks must be able to declare or disclose capital
ratios computed under the amended guidelinesThe
Basel III capital ratios will be fully implemented as
on March 31, 2018
(b) The capital requirements for the implementation
of Basel III guidelines may be lower during the initial
periods and higher during the later years. Banks
needs to keep this in view while Capital Planning;
(c) Guidelines on operational aspects of
implementation of the Countercyclical Capital Buffer.
Guidance to banks on this will be issued in due
course as RBI is still working on these. Moreover,
some other proposals viz. Definition of Capital
Disclosure Requirements, Capitalisation of Bank
Exposures to Central Counterparties etc., are also
engaging the attention of the Basel Committee at
present. Therefore, the final proposals of the Basel
Committee on these aspects will be considered for
implementation, to the extent applicable, in future.
(d) For the financial year ending March 31, 2013,
banks will have to disclose the capital ratios
computed under the existing guidelines (Basel II) on
capital adequacy as well as those computed under
the Basel III capital adequacy framework.
(e) The guidelines require banks to maintain a
Minimum Total Capital (MTC) of 9% against 8%
(international) prescribed by the Basel Committee of
Total Risk Weighted assets. This has been decided
by Indian regulator as a matter of prudence. Thus,
it requirement in this regard remained at the same
level. However, banks will need to raise more
money than under Basel II as several items are
excluded under the new definition.
(f) of the above, Common Equity Tier 1 (CET 1)
capital must be at least 5.5% of RWAs;
(g) In addition to the Minimum Common Equity Tier
1 capital of 5.5% of RWAs, (international standards
require these to be only at 4.5%) banks are also
required to maintain a Capital Conservation Buffer
(CCB) of 2.5% of RWAs in the form of Common
Equity Tier 1 capital. CCB is designed to ensure
that banks build up capital buffers during normal
times (i.e. outside periods of stress) which can be
drawn down as losses are incurred during a stressed

period. In case such buffers have been drawn down,

the banks have to rebuild them through reduced
discretionary distribution of earnings. This could
include reducing dividend payments, share
buybacks and staff bonus.
(h) Indian banks under Basel II are required to
maintain Tier 1 capital of 6%, which has been raised
to 7% under Basel III. Moreover, certain
instruments, including some with the characteristics
of debts, will not be now included for arriving at Tier
1 capital;
(i) The new norms do not allow banks to use the
consolidated capital of any insurance or non
financial subsidiaries for calculating capital
adequacy.
(j) Leverage Ratio : Under the new set of guidelines,
RBI has set the leverage ratio at 4.5% (3% under
Basel III). Leverage ratio has been introduced in
Basel 3 to regulate banks which have huge trading
book and off balance sheet derivative positions.
However, In India, most of banks do not have large
derivative activities so as to arrange enhanced
cover for counterparty credit risk. Hence, the
pressure on banks should be minimal on this count.
(k) Liquidity norms: The Liquidity Coverage Ratio
(LCR) under Basel III requires banks to hold enough
unencumbered liquid assets to cover expected net
outflows during a 30-day stress period. In India, the
burden from LCR stipulation will depend on how
much of CRR and SLR can be offset against LCR.
Under present guidelines, Indian banks already
follow the norms set by RBI for the statutory
liquidity ratio (SLR) and cash reserve ratio (CRR),
which are liquidity buffers. The SLR is mainly
government securities while the CRR is mainly cash.
Thus, for this aspect also Indian banks are better
placed over many of their overseas counterparts.
(l) Countercyclical Buffer: Economic activity moves
in cycles and banking system is inherently procyclic. During upswings, carried away by the boom,
banks end up in excessive lending and unchecked
risk build-up, which carry the seeds of a disastrous
downturn. The regulation to create additional capital
buffers to lend further would act as a break on
unbridled bank-lending. The detailed guidelines for
these are likely to be issued by RBI only at a later
stage.

On the day of release of these guidelines, analysts

felt that India may need at least $30 billion (i.e.
around Rs 1.6 trillion) to $40 billion as capital over
the next six years to comply with the new norms. It
was also felt that this would impose a heavy
financial burden on the government, as it will need
to infuse capital in case it wants to continue its hold
on these PS Banks. RBI Deputy Governor, Mr Anand
Sinha viewed that the implementation of Basel II
may have a negative impact on India's growth story.
In FY 2012-13, Government of India is expected to
provide Rs 15888 crores to recapitalize the banks.
as to maintain capital adequacy of 8% under old
Basel II norms.
Some Major Developments after 2nd May 2012 (i.e.
the date when RBI issued Basel III guidelines) :
(a) On 30th October 2012, RBI in its Second Quarter
Review of Monetary Policy 2012-13 has declared as
follows :
(i) "Basel III Disclosure Requirements on Regulatory
Capital Composition
The Basel Committee on Banking Supervision
(BCBS) has finalised proposals on disclosure
requirements in respect of the composition of
regulatory capital, aimed at improving transparency
of regulatory capital reporting as well as market
discipline. As these disclosures have to be given
effect by national authorities by June 30, 2013, it
has been decided:
to issue draft guidelines on composition of capital
disclosure requirements by end-December 2012.
(ii) Banks Exposures to Central Counterparties
(CCP)
The BCBS has also issued an interim framework for
determining capital requirements for bank
exposures to CCPs. This framework is being
introduced as an amendment to the existing Basel II
capital adequacy framework and is intended to
create incentives to increase the use of CCPs. These
standards will come into effect on January 1, 2013.
Accordingly, it has been decided:
to issue draft guidelines on capital requirements for
bank exposures to central counterparties, based on
the interim framework of the BCBS, by midNovember 2012.
(iii) Core Principles for Effective Banking Supervision

The Basel Committee has issued a revised version of

the Core Principles in September 2012 to reflect the
lessons learned during the recent global financial
crisis. In this context, it is proposed:
to carry out a self-assessment of the existing
regulatory and supervisory practices based on the
revised Core Principles and to initiate steps to
further strengthen the regulatory and supervisory
mechanism.
(b) On 7th November, 2012 : RBI has issued final
guidelines in respect of Liquidity Risk Management
by Banks
On September 1, 2014 : RBI revised some of its
rules governing instruments that qualify as bank
capital under Basel-III
Revised rules make instruments more attractive and
broaden the base for AT-1 bonds to include retail
investors
Moodys says the amended rules will also allow
banks to have a higher proportion of AT-1 in their
Tier-1 capital
The major benefit is expected to accrue to public
sector banks
Low capital levels are a key credit weakness for
many Indian banks, particularly PSBs

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