RBI says haste in easing norms for banks harmful to economy

Defaults rates high, provisions inadequate to cover losses

Rebuffing demands for easing regulatory norms for banks, the Reserve Bank of India on Friday warned that any haste in relaxing rules for capital adequacy and risk weights when defaults were high and provisions low was harmful for economy.

In the first report “Trend and Progress of Banking in India 2017-18” under new Governor Shaktikanta Das, the RBI said the Basel III norms recommended risk weights for various credit exposures, based on cumulative default rates (CDR) and recovery rates observed internationally. 

However, CDRs and loss-given default (LGD) rates observed in India are much higher than observed internationally, the RBI said