RBI proposes new norms for capital requirement for banks

The central bank has sought comments on the draft by January 31, 2022.

RBI

The Reserve Bank of India (RBI) on Wednesday proposed to replace existing approaches for measuring minimum operational risk capital requirements of banks with a new Basel-III standardised approach.

‘Operational risk’ refers to the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.

The RBI issued the ‘Draft Master Direction on Minimum Capital Requirements for Operational Risk’ as part of the convergence of its regulations for banks with Basel-III standards.

The central bank has sought comments on the draft by January 31, 2022.

All existing approaches – Basic Indicator Approach (BIA), The Standardised Approach (TSA)/ Alternative Standardised Approach (ASA) and Advanced Measurement Approach (AMA) for measuring minimum operational risk capital requirements – are proposed to be replaced by the new standardised approach (Basel-III Standardised Approach).

The central bank aims to put the modified norms in place from April 1, 2023.

Meanwhile, in a circular, the RBI said any payment bank or small finance bank that intends to undertake the government agency business may be appointed as an agent of the RBI upon execution of an agreement with it.

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