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Bangalore, Oct 11: With the March 31, 2007, deadline to comply with Basel II norms fast round the corner and the Reserve Bank of India (RBI) mulling a possible extension, the bankers are divided over what could be the ideal deadline for Basel II implementation. However, almost all of them are convinced that an extension of the deadline is necessary for better implementation of Basel II.
“We are on schedule to implement Basel II by March 2007. But in case the deadline is extended, we would be able to further fine-tune the process”, said PP Mallya, chairman and managing director, Vijaya Bank.
“Public sector banks in India may need some more time to put in place the required management information system (MIS) for implementation of Basel II norms, due to large branch network and updation of historical data. Most of the banks have already initiated measures in this direction. Marginal extension of the deadline is desirable”, added MBN Rao, CMD, Canara Bank.
According to B Sambamurthy, CMD, Corporation Bank, “Basel II covers three aspects — market risk, credit risk and operational risk. Operational risk is a continuous process and there cannot be any deadline for it”.
“Under the advanced approach, banks are required to collect data for past five years besides ensuring a stabilised internal rating system. Most of the banks have compiled data of past three to four years. So compliance with the advanced approach may take another 18 to 24 months”, said CP Swarnkar, CMD, Syndicate Bank. A similar view is expressed by V Sridar, CMD, UCO Bank. He feels that another one year is required to collect and compile data of past five years.
Bankers are unanimous that collection and compilation of historical data is the biggest challenge in implementation of Basel II. “Historical data collection is the main issue”, said Ananthakrishna, chairman, Karnataka Bank. The migration to core banking solution (CBS) is one of the means to tackle this issue, industry experts said. However, most of the bankers are confident that by March 2007, banks will be able to comply with other aspects of Basel II including maintenance of adequate capital. Most of the banks have recently raised Tier I or Tier II capital to maintain adequate capital, industry experts said.
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