Basel-II will be crucial for Indian banks (?Welcome to Basel-II?, June 19). While the norms have already been made applicable to domestic banks having overseas presence, they are slated to be applicable for other banks from March 2009. While Basel-II is expected to make capital allocations more risk-sensitive, it will encourage banks to think in terms of convergence, as that would entail capital build-up by them as a cushion against various risks and also for funding business expansion programmes. Banks today have an appropriate mechanism put in place to address credit and market risks but Basel-II is all about operational risks, which is an unexplored territory. By suitably setting off risk against return, Basel-II would help banks to improve the quality of their credit portfolio and manage credit risk even better. Implementation of Basel-II reflects India?s commitment to make the banking sector sound, strong and globally competitive.
?Srinivasan Umashankar, Nagpur
