altering the risk weights and provisioning requirement for sectors witnessing very high growth) seems more suitable. Deviations from the Basel framework are permissible in the “comply or explain” framework. The risk, however is that markets may interpret such deviation as non-compliance. Communication, therefore, during peer group review by Basel Committee as well as with markets assumes great significance.
Leverage ratio Basel III prescribes a leverage ratio (ratio of Tier I capital to book value of assets including off-balance sheet items) as backstop arrangement to supplement the capital adequacy ratio. Our view has been that since, for Indian banks, the SLR requirements are substantial and carry little risks, these should be kept out of the leverage ratio.