The Telegraph
Since 1st March, 1999
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RBI alert on new capital adequacy rules

Mumbai, April 12: With just over two weeks to go before the monetary and credit policy for the new fiscal is announced, top officials of the Reserve Bank of India today met bank chairmen to discuss various issues, including priority sector lending and new capital adequacy norms.

Though the meeting is dubbed as a “routine exercise”, RBI deputy governor G. P. Muniappan, it is learnt, has asked the bank chiefs to be prepared for the new capital adequacy norms which are likely to be put in place in another three years.

Senior bankers who met Muniappan also discussed the progress achieved in the disbursement of home loans.

However, the meeting did not discuss the recent Union Budget announcement where finance minister Jaswant Singh unveiled plans to swap high-cost debt held by banks for low-cost debt. “This was not discussed at all,” a senior RBI official said.

While it is widely felt that the last financial year was generally good for banks, issues such as high level of investments by banks in government securities and RBI guidelines on capital adequacy has caused some concern.

Although the RBI wants banks to assign 100 per cent risk weight to its loan portfolio, banks’ investments in government securities attract a comparatively lower risk.

On the other hand, the new Basel Capital Accord is in favour of risk weights that reflects the borrower’s credit rating.

Credit-deposit ratio

The credit-deposit (C-D) ratio of public-sector banks at 53.5 per cent was lower than that of foreign banks at 89.5 per cent as on last Friday of December 2002, according to RBI.

The C-D ratio of all scheduled commercial banks stood at 57.7 per cent, RBI said in its quarterly handout here today.

For other scheduled commercial banks, State Bank of India and its associates, and regional rural banks, the ratio was 64.3 per cent, 57.9 per cent and 44.7 per cent respectively.

Among the states/union territories, the highest C-D ratio was observed in Chandigarh (120.3 per cent) followed by Maharashtra (91.1 per cent) and Tamil Nadu (85 per cent). The ratio was lowest in Lakshadweep (7.3 per cent) while that of Daman & Diu was 8.9 per cent and Sikkim at 16 per cent.

As regards population group-wise C-D ratios of scheduled commercial banks, metropolitan centres had the highest ratio of 80 per cent followed by rural (42.4 per cent), urban (42.3 per cent) and semi-urban (34.5 per cent).

The top 100 centres arranged according to size of deposits accounted for 60.9 per cent of total deposits and top 100 centres as per size of bank credit accounted for 75.6 per cent of total bank credit, RBI said.

Nationalised banks as a group accounted for 50.3 per cent of the aggregate deposits, while SBI and its associates accounted for 24.4 per cent, it added.

RBI said shares in aggregate deposits were 16.8 per cent for other scheduled commercial banks, 4.7 per cent for foreign banks and 3.8 per cent for regional rural banks.

As regards gross bank credit, nationalised banks accounted for a share of 46.5 per cent of total bank credit, while SBI and associates had a share of 24.5 per cent.

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