These developments would lead to much greater demand for banking activity in rural areas. The two-fold implications of these developments for the banking sector are apparent. First, with higher financing needs of such new activities vis-a-vis traditional ones, the overall financing intensity of agriculture is likely to experience a manifold rise.
Broadly, these reforms will require banks to hold more and better quality capital and to carry more liquid assets, will limit their leverage and mandate them to build up capital buffers in good times that can be drawn down in periods of stress. The Basel III process is not yet complete.