Basel III: Cost-Benefit analysis for Indian Banks


Ever since the global financial crisis hit the world economy in 2008, Basel Committee on Banking Supervision (BCBS) has been instrumental in
suggesting regulations which will largely enhance the banking system’s ability to absorb economic upheavals. The suggested Basel-III regulations are an improved version of the earlier Basel-II banking regulations. It primarily emphasizes the need for additional capital, liquidity maintenance and leverage ratio requirements. The requirement of additional capital is associated with the cost of capital. This paper is an effort to carry out a cost-benefit analysis of Basel – III implementation for Indian banks.

The first part of this paper provides a brief background of Basel regulations. Earlier studies carried out in this field are reviewed and presented in the subsequent sections. Based on the past trend and suggested Basel-III accord, the paper quantifies the additional capital required by Indian banks by March-2019. The possible losses are quantified in terms of possible loss in GDP in case a financial crisis hits the economy as on date. The
findings, scope for further research and limitations of the study are mentioned in the concluding part of the paper.

Key words: Basel-III, Cost-Benefit analysis, Financial Crisis

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