Compared to the requirement of a minimum of 2 per cent equity capital as percentage of risk weighted assets, the new dispensation under Basel III stipulates 7 per cent equity capital, inclusive of capital conservation buffer of 2.5 per cent.
In addition there is a requirement of countercyclical capital buffers which will be required to be built up under certain conditions as also of additional capital requirement for Global Systemically Important Financial Institutions (GSIFIs). Higher equity capital is envisaged to contain risks in the financial system and make it more resilient.