Chart 3: Actual capital requirements based on observed CDRs  It would be evident that with this kind of default behaviour, applying the Basel specified risk weights would understate the true riskiness in the loan assets carried on the books of Indian banks.
This could be overcome by two ways: (i) by keeping the minimum capital requirement at 8%, but recalibrating the Basel specified risk weights for each type of credit exposure in accordance with the observed CDRs in India; (ii) by using the Basel specified risk weights, but prescribing a higher minimum 3  Based on the CDRs published by the credit rating agencies and methodology adopted from the BCBS Discussion paper on ‘Regulatory treatment of accounting provisions’ (October 2016)  Page 14 of 19  capital requirement.