RBI/2006-2007/357
DBOD.
No. BP. BC. 90 / 20.06.001/ 2006-07 April
27, 2007 The
Chairman/Chief Executive Officer
All
Commercial Banks
(excluding
LABs & RRBs) Dear
Sir, Prudential
Guidelines on Capital Adequacy and Market Discipline – Implementation of the New
Capital Adequacy Framework Please
refer to our letter DBOD.No.BP.1151/21.06.001/2006-07
dated March 20, 2007 forwarding the revised draft guidelines for implementation
of the New Capital Adequacy Framework (Revised Framework) for comments/feedback.
On the basis of the feedback received, the guidelines have been finalised and
furnished in the Annex
for implementation. Effective
Date 2.
Foreign banks operating in India and Indian banks having operational presence
outside India should adopt Standardised Approach (SA) for credit risk and Basic
Indicator Approach (BIA) for operational risk for computing their capital requirements
under the Revised Framework with effect from March 31, 2008. All other
commercial banks (excluding Local Area Banks and Regional Rural Banks) are encouraged
to migrate to these approaches under the Revised Framework in alignment with them
but in any case not later than March 31, 2009. These banks shall continue
to apply the Standardised Duration Approach (SDA) for computing capital requirement
for market risks under the Revised Framework. Parallel
run 3.
With a view to ensuring smooth transition to the Revised Framework and with a
view to providing opportunity to banks to streamline their systems and strategies,
banks were advised to have a parallel run of the revised Framework. A copy of
the quarterly reports to the Board of Directors may be continued to be submitted
to the Reserve Bank of India – one each to the Department of Banking Supervision,
Central Office and the Department of Banking Operations and Development, Central
Office. Migration
to other approaches under the Revised Framework 4.
Banks are required to obtain the prior approval of the Reserve Bank to migrate
to the Internal Rating Based Approach (IRBA) for credit risk and the Standardised
Approach (TSA) or the Advanced Measurement Approach (AMA) for operational risk
for computing regulatory capital requirements. A separate communication in this
regard will be issued to banks at a later date, specifying the pre-requisites
and procedure for approaching the Reserve Bank for seeking its prior approval
for such migration. Yours
faithfully, (Prashant
Saran)
Chief General
Manager-in-Charge |