An assessment of implementation of Basel III norms in India

Abstract

As a part of Basel III reforms, Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) are new instruments of prudential liquidity in a banking system aimed at equipping the banking sector towards stability by curtailing excessive maturity transformation risks and ensuring a healthy proportion of assets and liabilities while dealing with the funding. This study has taken RBI guidelines regarding LCR and NSFR Requirements as a base and aims at analyzing the impact of the compliance of liquidity ratios on the Indian Banking System. The analysis shows that the liquidity requirements in the Basel III Accord, as prescribed by the Reserve Bank of India are quite stern as they potentially hamper the growth of the economy by impacting the lending activities of the banks.