| At a recent discussion with Reserve Bank of India (RBI) officials on the draft Basel-II norms, bankers wanted RBI to reduce the level of capital requirement for operational risks. |
| But banks were categorically told they have to live with it, as the capital adequacy needs cannot be different for Indian banks, banking sources said. |
| The capital adequacy requirements for credit risk, market risk and operational risk have been decided by the Basel Committee on Banking Supervision. |
| RBI has already issued draft guidelines on implementing the Basel-II norms and decided to adopt consultative approach so that the new capital adequacy norms do not have a disruptive effect on the financial sector. |
| The sources said RBI estimates capital requirement for operational risk to be about 12-15 per cent of gross interest income when the Basel-II norms take effect in India from 2007-08 onwards. |
| Bankers feel the the capital adequacy requirement for operational risks is "very high" and could be counterproductive as the capital adequacy requirement will rise as banks' generate more and more income. |
| The sources said operational risks could scoop off nearly two percentage points off the banking sector's capital adequacy of 12.9 per cent as on March 31, 2004. In absolute terms, banks will need an aggregate of Rs 20,000 crore to meet capital adequacy for operational risks. |
| The sources said visiting foreign bankers have been expressing concern over the impact of Basel-II norms, and also fear stagnation in the growth of assets. The 9 per cent capital adequacy for credit risk is likely to have a positive impact on the banking sector as a result of adoption of a standardised approach. |
| Capital savings on credit risks arise owing to lower capital requirements for high safety rating category exposures. |
| Capital requirements for market risks would have dented capital adequacy by over 1 percentage point owing to higher capital needs for trading book. |
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