Basel report fully compliments RBI's regulatory framework
The Reserve Bank's regulations on large exposures of banks are "compliant" on average with the framework set by the global central bankers body at Basel and some are even stricter than the global norms, says a report by the Bank of International Settlements.
The regulatory consistency assessment program (RCEP) of the Basel Committee on Banking Supervision has found that domestic banking regulations are "compliant" as of June 2019, which is the highest possible grade, says the report.
According to the report by the Bank for International Settlements, which is an institution of the central banks around the world based in the Swiss city of Basel, in some aspects, the domestic regulations are stricter than the large exposures framework of Basel itself.
The large exposures framework applies to all scheduled commercial banks in the country apart from regional rural banks and was first implemented by way of a circular by the Reserve Bank way back in December 2016.
The framework became partially effective since April 2019 and the same circular was modified in June 2019, notes the report.
The report says from April 2020 onwards, the obligation to assess the connectedness based on economic interdependence and the inclusion of non-centrally cleared derivatives exposures in the calculation of the large exposure limits will also enter into force as per the revised circular.
The "compliant" grade is a basic assessment of the scope and definition of the framework, minimum requirements and value of exposures says the report.
Citing an aspect where India is stricter, the report notes that "exposures to globally systemically important banks are subject to stricter limits."
These requirements are in line with the letter and spirit of the Basel guidelines and "the scope of application of the Indian standards is wider than just the internationally active banks covered by the Basel framework".
The report further says the assessment report penciled by Vasily Pozdyshev, the deputy governor of the Russian central bank, has focused on the completeness and consistency of the Indian regulations as applied to commercial banks as on June 7, 2019.
However, the adds that prudential outcomes, the resilience of the banking system or the supervisory effectiveness of the Indian authorities are not in the scope of the assessment.
The four-phased assessment began in early 2018 and started with the self-assessment by the RBI, followed by an on-site assessment where the team has met with the officials of the RBI and rating agencies, a review and finally a desk assessment of the draft regulation.
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