RBI told to ease bank capital norms

A parliamentary panel has asked Reserve Bank of India to ease its rules on capital requirements for banks so that they can increase lending.

“Such stringent norms stipulated by the RBI for our banks … is unrealistic and unwarranted,” said a report tabled in parliament by the Parliamentary Committee on Finance.

The report comes after the government and some of the board members of the RBI have put pressure on the central bank to relax capital requirements for banks as they seek to boost credit and economic growth.

Former RBI governor Urjit Patel, who quit last month, opposed the government’s demand for lowering capital requirements and warned about the need for a cushion to offset unexpected risks.

Indian banks are required to maintain a minimum capital to risk weighted asset ratio (CRAR) at 9 percent, against the global Basel-III requirement of 8 percent. On top of that, they have to keep a capital conservation buffer that is supposed to climb to 2.5 percent by March 2019.

The rollback of additional capital requirements could release about 5.34 trillion rupees ($76 billion) into the economy by releasing capital for lending.