Higher provisioning requirements, on this count as well as other factors, will affect the capital position of several banks. This would necessitate a higher recapitalisation of the public sector banks. The Government and the Reserve Bank are in dialogue to prepare a package of measures to enable PSBs to shore up requisite capital in a time-bound manner.
They may wish to take some steps first to strengthen the capitalisation and risk management capabilities of their banks and to enhance the quality of bank supervision. The text of Basel II will be released today on the website of the Bank for International Settlements.