Basel II norms from March 31

The Basel II norms for foreign banks operating in India and Indian banks with international presence will be effective from March 31. Banks have to adhere to these norms.

Among the Indian banks with a foreign footprint are State Bank of India, ICICI Bank, Bank of Baroda and Bank of India. The Indian banks as well as the foreign banks with Indian subsidiaries claim to have already complied with Basel II norms.

Under the new norms, banks have to allocate capital based on credit ratings. Thus for loans extended to triple AAA rated companies, banks have to only provide 20 per cent risk weight unlike in the past where the risk weight was 100 per cent across the board. But Basel II norms are stricter on companies with low ratings. For loans to the lowest rated companies, banks have to provide a risk weightage of 150 per cent.