The Reserve Bank's move to extend the deadline for meeting the capital conservation buffer (CCB) norms by one year would help increase lending capacity of banks by over Rs 3.5 lakh crore, experts said. The additional amount will help provide much-needed fund for micro, small and medium enterprises (MSMEs) and non-banking financial companies (NBFCs)that are facing cash crunch. According to a senior public sector banker, it will make difference for those banks which are below this regulatory requirement of capital. It will also help a few banks defer capital-raising plans from the market, as the requirement for the capital has come down due to extension to meet the CCB requirement, the banker said. Earlier this week, the RBI in the central board meeting decided to extend the implementation of the CCB norm of 0.625 per cent of risk-weighted assets (RWA) by a year to March 2020. However, the board decided to retain the capital adequacy ratio or CRAR at 9 per cent, against 8 per cent prescribed by Basel III norms. The CCB currently stands at 1.875 per cent and the remaining 0.625 per cent was to be met by March 2019, as per the deadline earlier fixed by the RBI. The extension of the timeline for the implementation of the last tranche of the CCB under Basel-III capital regulations could reduce the burden of public sector banks (PSBs) by Rs 35,000 crore this fiscal, rating agency Crisil said. Generally, there is a leverage of 10 times on the capital, the banker said, adding that the lending capacity would increase by Rs 3.5 lakh crore. It will help ease tight liquidity situation triggered by a series of defaults by group companies of Infrastructure Leasing & Financial Services Ltd. This will also provide some breathing space to capital-starved PSBs, Crisil said. The capital conservation buffer is the buffer that banks have to accumulate in normal times to be used for offsetting losses during periods of stress. It was introduced after the 2008 global financial crisis to improve the ability of banks to withstand adverse economic conditions. The agency also revised down its capital requirement estimate during the fiscal to Rs 85,000 crore, from the earlier Rs 1.2 lakh crore. Over Rs 1.12 lakh crore in capital has been infused into PSBs since April 2017 and another Rs 99,000 crore needs to be raised by March 2019, of which Rs 53,000 crore is scheduled as equity to be infused by the government, it said. The agency reiterated that a bulk of the additional capital is required for PSBs under the prompt corrective action (PCA) framework of the RBI. As of September 30, 13 out of 21 PSBs, mainly the PCA banks, had tier-I capital adequacy ratios, including CCB, below regulatory norms or less than 8.875 per cent.