Kolkata: India Ratings on Friday said that deferment of Basel III by the Reserve Bank of India (RBI) till March 2019 would ease pressure on banks.
“The Reserve Bank of India's (RBI) deferral of the Basel 3 implementation deadline by a year has eased the pressure on banks to issue hybrid Tier 1 capital in FY15,” the rating agency said in a report.
On Thursday, the apex extended deadline for banks to implement Basel III capital planning rules by a year to March 31, 2019, due to concerns from the industry on potential stress to asset quality.
This was a practical outcome of the current limited investor appetite for such instruments and the agency believes that the new deadlines do not dilute the spirit of Basel III, it said.
However, capital injection will remain a priority for Indian banks through the rest of this decade, as total capital required during the migration to Basel III will only go up due to the extra year added during the transition till March 2019, the report said.
The government's commitment to maintain its majority shareholding in public sector banks assures them of steady equity injections, the agency stated in its report.
Earlier guidelines required banks to issue as much as Rs. 26,000 crore of hybrid Tier I capital in FY15, significantly more than Rs. 11,200 crore of common equity Tier I that the government has budgeted to inject during the year.