The Reserve Bank of India (RBI) today proposed timelines for banks to migrate to advanced risk norms under Basel II, which entails improved standards for banks worldwide for assessing risks.
RBI has proposed that banks apply to the central bank for migrating to these norms earliest by April 1, 2012, for which it may give approvals by March 31, 2014.
RBI said banks were advised to undertake an internal assessment of their preparedness for migration to the advanced norms and decide whether to migrate.
Already, a basic approach for three kinds of risks — related to credit, operation and markets, have been implemented for banks in India. Basel II norms are an improved version of Basel I to prepare banks to assess different kinds of risks. These norms assume significance after the global financial crisis.
Basel I required banks to calculate a minimum level of capital that had to be kept aside, by assigning risk weight for each of the limited number of asset classes like mortgages and consumer lending.
