Impediments to implementing basel II in India

Abstract

The goal of this project is to analyze the various aspects that banks should prepare for in order ensure compliance with the proposed Basel II norms. The scope of our work is to analyze if India is ready to take the ride for Basel II migration. Currently, India is fairly well placed with respect to capital adequacy. With RBI imposing a deadline of Mar 2008 for Basel II migration, the project analyses if the banks are really ready for the plunge. We look at the RBI guidelines and evaluate the pre-requisites for implementing each of the pillars. We analyze in detail the economic impact and the presence of rating agencies. We then look at a case study between Axis bank and Punjab Sind Bank. The former is a well managed bank with clear disclosure items in the annual report. On the other hand, Punjab and Sind Bank an Indian Bank which has the minimum capital adequacy ratio for Basel II, but still lacks in other required Basel II implementation parameters including strongly on disclosure standards. Finally we argue based on the observed facts if India is ready for Basel II with the case study banks as samples.