Banking Awareness: Important Topic Base Rate System and Basel Norms for Coming IBPS Tests and Interviews

Major Efforts of International Banking

Base Rate System

• Base Rate System introduced in banking sector by the RBI with effect 1st July, 2010. 
• Base Rate System will replace Benchmark Prime Lending Rate (BPLR) introduced in 2013.
• Base Rate System introduced on the recommendation of Deepak Mohanty Committee aims at enhancing transparency in lending rate of banks and enabling better transmission of monetary policy.

Basel Norms:

Basel norms are set by Bank of International Settlement (BIS) in Basel, Switzerland. 55 countries Central Bank's are members to the BIS.

Basel II Norms:

It is guide to capital adequacy standards for lenders. The aim of Basel II is to better align the minimum capital required by Regulators with risk.

Basel III Norms:

• It will become operational from 1st January, 2013 in a phased manner.
• Banks to increase their core tier-one capital ratio to 4.5%.
• Provision for a counter-cyclical capital conservation buffer of 2.5% by 2019.
• The total CRAR required Basel III is proposed at 10.5%.

Rules for Basel III :

Reserve Bank of India released its guidelines on Basel III capital regulation on 2nd May, 2012.

Guidelines for Basel III :

• Indian bank have to maintain. Tier-I capital or core capital at least 7% of their risk weighted assets or ongoing basis.
• The total capital ratio including tier-I and tier-II must be at least 9%.
• For tousle year ending 31st March, 2013 bank will have to disclose capital ratio computed under existing guidelines.