Let me then move to the more weighty question of why the Reserve Bank has prescribed higher capital and leverage norms for Indian banks than the Basel III minimum. Table 4 summarises the Basel III (international) prescriptions alongside the current requirements in India under Basel II, and as required under Basel III when fully implemented. 48.
What is the rationale for our more “onerous” capital standards? Note that banks in India follow the Standardised Approaches under Basel II. The higher prescription is intended to address any judgemental error in capital adequacy viz. wrong application of standardised risk weights, misclassification of asset quality etc.