BASEL NORMS IMPLEMENTATION WITH RESPECT TO INDIAN BANKS: A CRITICAL REVIEW

The failure to prevent financial crises in the twenty first century raises concerns. There is a wide body of evidence that the most severe economic crises are associated with banking sector distress and banking crises result in losses in economic output. The objective of the Basel III reforms is to reduce the probability and severity of future crises. This will involve some costs arising from stronger regulatory capital and liquidity requirements and more intense and intrusive supervision. But our analysis and that of many others has found the benefits to society well exceed the costs to individual institutions. Basel III is fundamentally different from Basel I and Basel II. One central focus is strengthening global capital and liquidity rules (Basel III) with the goal of improving the banking sector‘s ability to absorb shocks arising from financial and economic stress. Basel III emphasizes the need for transparent and comparable accounting rules and for improvements in corporate governance, imposition of a group leverage ratio and proposes a Non-Operating Holding Company Structure reforms that are essential to deal with contagion and counterparty risk that are so integral to the ‗too big to fail‘ issue. This study aims to study these viewpoints in the perspective of Indian scenario. In the backdrop of Herstatt Bank debacle, G-10 countries and Luxembourg formed a standing committee under the auspices of the Bank for International Settlements (BIS) called the Basel Committee on Banking Supervision. It plays a leading role in standardizing bank regulations across jurisdictions. The committee has been focusing on defining roles of regulators in cross-jurisdictional situations and to promote uniform capital requirements so banks from different countries may compete with one another on a ―level playing field.‖ In Basel I (1988) the committee set minimum capital requirements for banks‘ credit risk and added capital charges for market risk in an amendment on 1996. The Basel Committee developed Basel II which is an overhaul of Basel I in the year 2000. When Implementation of Basel II was nearing in completion a financial crisis hit and shows the inadequacy of Basel Accords. The failure to prevent financial crises in the twenty first century raises concerns. The obvious questioned raised whether Basel Committee is fine tuning an approach that may be