Basel norms are a set of guidelines issue by the Basel Committee on Banking Supervision (BCBS) in

order to help banks and financial institutions tackle the risks associated with lending. The main focus
here is to make the financial institutions well prepared to face any kind of unforeseen circumstances
by keeping enough capital with them. By regulating the amount, they need to keep for every loan
that they give, the flow of funds and hence the risk associated can be controlled. There are Basel I,
Basel II and Basel III accords. Basel III was issued after the global financial crisis of 2008. The main
objective of all these accords is to aid banks in mitigating and absorbing losses.

Recently banks have eased the norms for bank lending to NBFCs having a good rating. This is aimed
at improving the flow of funds via NBFC and to enhance the liquidity of NBFC. RBI has decided “rated
exposures of banks to all NBFCs, excluding core investment companies (CICs) would be risk weighted
as per the ratings given by the credit rating agencies”. This is similar to what is being done for
corporates.