India needs to open up capital account to the world: Knight

Mumbai, Sep 26 (UNI) India needs to open up its capital account to reap the benefits of globalisation and for this the country needs to open up its balance of payments to the rest of the world through capital account convertibility, said a top executive of the Bank for International Settlements (BIS), Mr Malcolm Knight here today.

''I believe that if a country has to reap the advantages of globalisation, it is essential that over a period of time it opens up its balance of payments through capital account convertibility route,'' he said while speaking at a three-day summit on 'Global Banking: Paradigm Shift Towards meeting emerging challenges' organised by Federation of Indian Chamber of Commerce and Industry (FICCI) and Indian Banks Association (IBA) jointly here.

Mr Knight said ''implementing capital account convertibility required a sequenced approach and sound macroeconomic policies.'' Further, Mr Knight said the progress that Indian commercial banks have made on meeting new capital adequacy rules in March next year is ''entirely appropriate.'' The progress towards Basel II implementation in India is entirely appropriate to economic circumstances and is ambitious in that context, said he adding that ''the intention that commercial banks will go through a standardized approach for Basel II capital adequacy next year is both appropriate and feasible.'' Domestic banks have to meet the new capital adequacy requirements of Basel II by March, as per central bank rules. The new rules adjust capital requirements for lenders according to the risks inherent in each one's portfolio of loans and investments.

Currently, banks in India, at present, must have a minimum of 9 percent of capital adequacy, which is expressed by the capital provided for risk-weighted assets of a bank and is a key indicator of a bank's financial strength.

UNI SN KU SKB1527