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International Journal of Economics, Finance and Management >> Volume 5, Issue 2, June 2016

International Journal of Economics, Finance and Management

Basel Committee’s Reforms and Capitalization of Indian Banking

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Author Rajesh Pal
ISSN 2307-2466
On Pages 71-82
Volume No. 3
Issue No. 2
Issue Date April 01, 2014
Publishing Date April 01, 2014
Keywords Basel committee on Banking Supervision (BCBS), Risk Based Supervision (RBS), Capital Assets, Assets Quality, Management, Earnings, Liquidity and System and Control (CAMELS)


An important lesson from the financial crisis points to the need for banks to improve and strengthen their capital planning processes. The Basel Committee on Banking Supervision provides a forum for regular cooperation on banking supervisory matters. Its objective is to enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide. The Basel Committee III presents sound practices observed at some banks to foster overall improvement in the capital planning processes of banks required to implement the Basel III framework. It is not intended to outline a one-size-fits-all approach to capital planning, as it is understood that banks would need to adopt solutions that are tailored to their individual circumstances (BCBS, 2010). Indian banking system has withstood the pressure of global financial turmoil because of: (i) upsurge in domestic saving rate, and (ii) improvement in the capital to risk-weighted assets ratio (CRAR). The various factors that led to and precipitated the crisis are now well known and documented. Therefore, this paper does not discuss the causes of the financial crisis but focuses on the actions taken so far by the government, central bankers and regulators over the last one year for strengthening financial regulation and supervision. This paper investigates the proximately explanatory factors behind the cross country differentials in the capital to risk weighted assets ratio. The paper discusses the various risks in the banking systems that they have to face in order to survive in the competitive era.

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