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Sunday, May 13, 2012

Compliance with Basel-III should be a breeze: PNB chief

Public sector lender Punjab National Bank (PNB) does not see any large pressure or problems in its transition to Basel-III, the new international standards for capital requirements of banks.

This is despite India venturing into over-compliance with Basel-III with higher and more stringent requirements.

The Reserve Bank of India came out with final guidelines on this on May 2.

Large buffer

The Basel-III capital standards require the banks world over to hold thicker buffers of capital to absorb losses.

Under the new regime, banks will have to hold three times as much equity as they had to under the previous norms. As of March 31, 2012, if one works on Basel-III, PNB's capital adequacy ratio works out to 12.08 per cent compared to 12.63 per cent under Basel-II.

PNB's common equity is at 8.49 per cent, against the regulatory requirement of 4.5 per cent, Mr K.R. Kamath, PNB's Chairman and Managing Director, pointed out.

“We don't foresee large pressure in moving to Basel-III,” he said.

Raising Capital

On raising capital for the current fiscal, Mr Kamath said he expects two things to happen in the fiscal.

Because of the focus on recovery, there would be some write-back of provisions, which will be ploughed back as income.

Second, if the interest rate cycle reverses this year, the bank would be able to unlock certain treasury profits. “Depending on the emerging situation, we need to plan our capital raising,” he said.


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