Welcoming RBI's decision to extend implementation of Basel III capital norms by a year, rating agencies have said that lenders particularly state-owned ones, which are facing capital pressure, will get additional time to meet the minimum capital norms.
"The main benefit from the one-year moratorium will be the delay in the phase in of the capital conservation buffer from March 2016, instead of FY15, as most other parameters remain the same," rating agency Fitch said in a report.
RBI last week extended the transitional period for implementation of the stringent Basel III capital norms by a year to March 2019, as most of the banks are facing stress on account of weak asset quality.
Fitch further said the move will help banks to get some crucial breathing space from the lower 5.5 per cent pre-specified capital trigger on additional tier 1 securities until FY19 when it reverts to 6.125 per cent.
According to Icra, PSBs' tier I capital requirement to meet growth and to meet Basel III norms would increase to Rs 3.9 - 4.2 trillion from Rs 3.3 - 3.6 trillion due to longer transition period.
The report said earlier public sector banks' needed common equity tier I capital of Rs 2 - 2.2 trillion and additional tier I capital of Rs 1.3 - 1.4 trillion during FY15-18, but as per revised schedule this would be marginally higher at Rs 2.5 - 2.7 trillion and Rs 1.4 - 1.5 trillion respectively during FY15-FY19.
"The extension provides short-term breather whereby PSBs' tier I capital requirement for FY15 reduces to less than Rs 15,000 crore as against earlier requirement of Rs 20,000- 45,000 crore, against which the government has budgeted Rs 11,000 crore.
Another rating agency, Crisil said that though extension of Basel III capital regulations deadline will have positive implications for banks' total capital requirements, it will increase the risks in the banks' tier I capital instruments, and will lead to higher cost for banks.
