Bankers ask RBI to give more time to adhere to Basel II norms

On Tuesday in Mumbai in the pre-credit policy meeting of the bankers with the RBI, the bankers have asked the Reserve Bank of India (RBI) to give more time to completely stick on to the Basel II norms which come into effect from fiscal year 2007-08.

RBI, on April 29 will be announcing credit policy, before the announcement of the policy the RBI officials met the CEOs of large commercial banks — PSU, private and foreign — to take into account their views on the economy.

According to the Basel II norms, for March 2008, banks have to set aside capital for the loan that is sanctioned, but not availed by the borrower. The risk weight-age is 20% for short-term unavailed limits and 50% for long-term unavailed limits. With this the banks’ capital adequacy ratio (CAR) will be affected. In this context, banks have asked the banking regulator to give them additional time to stick on to these guidelines.

In the meeting the bankers also took the rising inflation issue and the slowdown in the economy. Central bank officials had asked senior bankers their opinion on liquidity, interest rate and credit growth.

According to sources Citigroup country head Sanjay Nayar made presentation to the regulator on perception of overseas markets about India. He pointed that investors from developed countries like the US and Hong Kong are not worried about the recent developments in India. He said that they are of the view that the Indian market has seen correction.

In the meeting issue regarding fall in the foreign currency non-resident (FNCR) deposits was also raised by some bankers. This, they said, is due to the cap on the interest rate that is fixed by the central bank. Currently, banks can offer Libor minus 25 basis point on such deposits. FCNR deposits unable banks to lend in foreign currency. They also called upon RBI to tinker the reshipment policy.

The meeting was attended by State Bank of India chairman OP Bhatt, ICICI Bank CEO KV Kamath, Citigroup country head Sanjay Nayar, Canara Bank chairman and managing director MBN Rao, Bank of India CMD TS Narayanasami and Indian Banks’ Association CEO HN Sinor.

Among top RBI officials meeting was attended by Governor YV Reddy, four deputy governors — V Leeladhar, Rakesh Mohan, Usha Thorat and Shyamala Gopinath. Also, senior officials from monetary policy department were present.