Why in News ?
The country’s largest lender State Bank of India on Monday said it has raised Rs 7,000 crore by issuing Basel III compliant.
What are Basel III compliant bonds by RBI ?
- Basel III regulations are designed to enhance the quality and quantity of capital held by banks.
- Bonds qualify as tier II capital of the bank and has face value of Rs 10 lakh each bearing coupon rate of 6.24 per cent per annum payable annually for a tenor of 10 years.
- Issuer of the bonds can call back the bonds before the maturity date by paying back the principal amount to investors.
- There is call option after 5 years and on anniversary thereafter.
- Under the globally accepted Basel-III capital regulations, banks need to improve and strengthen their capital planning processes.
About Basel Guidelines
- Purpose of the accord is to ensure that financial institutions have enough capital on account to meet obligations and absorb unexpected losses.
- India has accepted Basel accords for the banking system.
- Basel I : Capital measurement system focused almost entirely on credit risk. India adopted Basel 1 guidelines in 1999.
- Basel II : The refined and reformed versions of Basel I accord. Has three parameters.
- Capital Adequacy Requirements
- Supervisory Review
- Market Discipline
- Basel III : Basel III guidelines were released in 2010. To promote a more resilient banking system by focusing on four vital banking parameters capital, leverage, funding and liquidity.
Source : Economic Times
Topic
GS II : Important International institutions, agencies and fora- their structure, mandate
GS III : Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment
Current Affairs Compilation : 22 September 2020