India's central bank is considering to what extent banks' holdings under the statutory liquidity ratio (SLR) can be used to meet capital requirements for Basel III global banking rules, a central banker said on Sunday.
SLR or the proportion of deposits that banks need to invest in government debt and other approved securities, currently stands at 24 percent. But analysts estimate banks' overall holding of SLR bonds is around 29 percent.
"We are looking at some norms to what extent SLR portion can be used under Basel III norms," said Anand Sinha, a deputy governor at the Reserve Bank of India.
Indian bankers estimate state-run banks will require an extra 8 trillion rupees ($162.9 billion) to meet new capital norms and their growth requirements over next eight years.
According to Basel III, banks must shore up their capital adequacy ratios and maintain top-quality capital at 7 percent of risk-weighted assets. Top quality capital includes equity capital.
Although Indian banks have much higher capital adequacy ratios than the minimum total capital requirement under Basel III, analysts say their so-called Tier I, or equity capital, needs to be shored up to meet the top-level capital requirement.
Basel III also proposes building countercyclical and additional capital buffers, which is expected to involve additional costs for Indian banks.
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