BASEL II IMPLEMENTATION: Challenges Faced by Commercial Banks, Suggestions for Improvement

Agenda
Relevance & Objectives Introduction Process Involved Findings Suggestions and Conclusion Constraints Takeaways from the project

Relevance & Objectives
 Identification of the need for the project  Location of areas of trouble in implementation  Possible suggestions

Basel Implementation
     Purpose of BCBS Basel I Basel II Role of RBI Need for Basel III

Process Involved
        Feasibility study Pilot study Geographic identification Research Target Interview Protocol Analysis Findings Suggestions and Conclusion

Findings
       Increase in Data collection Privacy and security issues Lack of Clarity of the final outcomes No effect on Short term lendings Lack of interest to calculate ICAAP Number of rating agencies is few Lack of clarity on classification of expenses

Findings
 No effect of Pro Cyclicality in India  No haste in movement to AMAs  Wait and watch regarding the comparability of capital standards post Basel II

Validity of the findings
 Whom did I meet?  Why did I choose them?  The Interview

The Experts
 Shri. R. Shaktivelu, General Manager, Karur Vysya Bank Ltd.  Shri. R. M. Patnaik, General Manager, Indian Overseas Bank.  Shri. Sri Ramanan, General Manager, Indian Bank.  Shri. Sheshadri Rao, Assistant General Manager, Indian Bank.  Mr. S. Sundar, General Manager, City Union Bank.  Shri. Naganna Prabhakaran, General Manager, Lakshmi Vilas Bank.  Officials at Tamil Nadu Mercantile Bank.

Suggestions

(do not confine to the reserve bank in particular but also the Indian Banking Association)

 Better implementation of Financial Inclusion programs  Data Privacy and security needs more attention  Special forum with in the frame work of IBA to discuss Basel challenges  Increase in the number of NIBMs  Classification of implementation expenses  Regulation in calculation of ICAAP

Suggestions

(do not confine to the reserve bank in particular but also the Indian Banking Association)

 Awareness about the uses and advantages of credit ratings need to be furthered  Need for capturing IT system losses under current framework  Continuance of parallel run during the implementation of advanced approaches  Strong corporate governance practices to be inculcated

Limitations
 Geographical constraint  Number of Banks under study  Fear of Supervisory action

Takeaways from the Internship
 First hand experience of government protocols and procedures involved  Know-how of the regulatory requirements of commercial banks  Vital contacts of all bank heads in Tamil Nadu  Personal Satisfaction

Thank You

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