RBI likely to introduce Basel III norms

The Reserve Bank is likely to place fresh curbs on banks' dependence on wholesale deposits. The central bank said that it is coming out with guidelines based on Basel III, an international agreement on broad regulatory principles, which will incorporate these changes. "In the guidelines, we will be looking at the liquidity measures mandated under the international agreement," said Anand Sinha, Deputy Governor, RBI. He was speaking on the sidelines of an event to launch Union Bank of India's Union Chetna service, a private television channel for customer and employee education. Sinha said that to grow their core deposits banks will have reach out to those outside the fold of banking and this would be feasible only if they bring down the cost of transactions by adopting technology. "One of the reasons for the crisis was the liquidity mismatch. In fact, during 2003-07, the overnight repo had increased three to four times in the US, which means that long-term assets were being funded by overnight funds in the US. These are the things one should be careful about," Sinha said.  Sinha told newspersons said that RBI would come out with draft guidelines on new bank licences very soon and the central bank would also shortly take a view of increasing the interest rates on savings deposits. He said that the downgrade of US by S&P would not impact investments of either the central bank or commercial banks. "The universe is not only built of only triple a rating. As far as There are various layers of investment grade rating. As far as banks with US operations are concerned the US government has said that for banks in their jurisdiction that the rating downgrade will not lead to higher risk" he said.

TOI