BASEL III AND ITS IMPLEMENTATION

For any business, profits are the important element but for banking business, safety and being solvent are foremost. Since banking is that business which deals with depositor’s money, so the protection of depositor’s money is important. To safeguard their interest, capital regulation came into picture. Basel accords are those guidelines which instruct banks to back up their risk with capital. Adequate capital adds cushion to bank’s failure and ensures depositors safety of their money. Basel III is the third accord and provides stricter approach towards managing risk and capital. RBI has also implemented these norms for Indian banks. This paper examines the new elements of Basel III accord and its implementation stages with special reference to India. By focusing on strict capital regulation Basel III has introduced higher capital ratios, new buffers and leverage ratio framework which enhances risk management practices and make banking sector robust and shock absorbent.