What are three pillars of Basel II?

Three Pillars of Basel II accord:

First Pillar of Basel II deals with maintenance of regulatory Capital calculated on three major risks the bankers are facing viz. Credit risk, Operation risk and Market risk.

Second Pillar of Basel II deals with the regulatory answer to the first pillar, which enables the banks to review their risk management systems.

Third Pillar aspires to balance the minimum capital requirement and decision-making. The market participants are enabled to gauge the capital adequacy of a Bank with the help of set of mandatory disclosures prescribed in third pillar.

Revised deadline for implementation of Basel III

The Reserve Bank of India (RBI) RBI in its notification no. RBI/2013-14/538/ DBOD.No.BP.BC.102/21.06.201/2013-14 dated March 27, 2014, has deferred the deadline for full implementation of Basel III norms to March 2019 instead of as on March 31, 2018. The revised deadline for full implementation of Basel III in India is closer to the internationally agreed date of January 1, 2019. Of late, industry-wide concerns have been expressed about the potential stresses on the asset quality and consequential impact on the performance / profitability of the banks. The Commercial banks in India were scrambling to raise thousands of crores of Rupees in the form of hybrid capital in FY15 to be complaint of capital requirement norms, prescribed under Basel III accord. This necessitated RBI to provide some lead time for banks to raise capital within the internationally agreed timeline for full implementation of the Basel III Capital Regulations. The extension of deadline by one year has delivered major respite to banks by removing immediate pressure on them to raise thousands of crores rupees of hybrid capital at a short period. The rescheduled transitional arrangements along with other modifications are as under.

Surendra Naik