BANKING AFFAIRS

Detailed explanation-1: -Basel II is the second of three Basel Accords. 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-2: -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-3: -In general, keeping in view the RBI’s goal to have consistency and harmony with international standards and our approach to adopt the pace as may be appropriate in the context of our country specific needs, the RBI had in April 2003 itself accepted in principle to adopt the new capital accord Basel II.

Detailed explanation-4: -Advantages of Basel II It has helped the banking sector be more secure due to the strict capital requirement norms. Strict supervision has helped many banks not deviate from the stipulated minimum capital requirement. This practice has helped banks to save themselves from the worst scenarios.