BANKING AFFAIRS

Detailed explanation-1: -Basel II is an international business standard that requires financial institutions to maintain enough cash reserves to cover risks incurred by their operations. The Basel accords are a series of recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision.

Detailed explanation-2: -Understanding Basel II It is based on three main “pillars": minimum capital requirements, regulatory supervision, and market discipline. Minimum capital requirements play the most important role in Basel II and obligate banks to maintain certain ratios of capital to their risk-weighted assets.

Detailed explanation-3: -In India, Reserve Bank of India has implemented the Basel II standardized norms on 31 March 2009 and is moving to internal ratings in credit and AMA (Advanced Measurement Approach) norms for operational risks in banks.

Detailed explanation-4: -Capital. The capital adequacy ratio should be kept at 12.9 percent. The minimum Tier 1 and Tier 2 capital ratios must be maintained at 10.5 percent and 2 percent of risk-weighted assets, respectively. Furthermore, banks must maintain a capital conservation buffer of 2.5 percent.