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Some Indian banks lagging in Basel II norms implementation

Written by: Staff
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Bangalore, Nov 22 (UNI) Some of the Indian banks are lagging behind in implementation of Basel II norms, given the impending timelines and need to devote considerable resources in this area so that they can address the necessary requirements of the RBI.

This was indicated in a survey report launched today by KPMG, titled 'India: Ready for Basel II?'. The report provided insight into the Indian banks' Basel II implementation programmes.

The report highlighted that as Basel II programmes begin to take effect, banks seem to be running on schedule to implement the RBI guidelines. These guidelines have provided the impetus for implementation of the Accord, and a number of banks were beginning to view the benefits of Basel II beyond compliance. This seems to indicate that the broader objective of improved soundness within the financial system and improved risk practices were gaining acceptance in the banking sector.

Key findings of the report indicated that banks surveyed appeared to have either already begun or were about to begin their Basel II programme. They seemed confident in their ability to meet the RBI guidelines for achieving The Standardised Approach for Credit Risk and The Basic Indicator Approach in respect of Operational Risk.

Among 46 per cent of the banks surveyed, compliance with regulation was driving the Basel II implementation programme. New private sector banks ranked enterprise risk management over compliance as their key driver.

Although the Regulator was yet to issue more specific guidelines in addition to those issued so far, only 16 per cent of the banks surveyed have commenced the process of planning for the more advanced approaches of Basel II, including collection of loss data, risk mitigation techniques and capital modelling, the report added.

From a technology perspective, respondent banks indicated that some progress had been made in credit and market risk management.

However, the same level of preparedness was not evident in the case of operational risks.

Approximately, 75 per cent of the banks' surveyed have not specifically budgeted funds for their Basel II programme and 89 per cent of the banks indicated that they have a 'dedicated team' responsible for Basel II implementation.

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