The CVA for OTC derivatives will also attract additional capital. Since the trading book and OTC derivative portfolios of Indian banks are very small and they do not have any exposures to re-securitized instruments, impact of these changes in capital regulation on their balance sheets is insignificant.
The average Tier 1 capital ratio of Indian banks is around 10% with more than 85% of it comprising common equity. The regulatory adjustments will reduce the available equity capital only marginally for various reasons. First, items such as goodwill, Deferred Tax Assets (DTAs) etc. are already deducted from Tier 1 capital for Indian banks.