Leeway On Bis Norms For Domestic Banks Likely

Andrew Crockett, general manager, Bank for International Settlements (BIS), today made it clear that all Indian banks may not need to adhere to new norms en masse.

"As with the first accord, a number of countries may feel that if their internationally active banks are to be required to adopt the new accord, all their banks should also do so for internal competitive reasons.... Other countries... such as Japan and the US apply different standards to their domestic community banks. India will have to make its own judgement as to how to proceed in this matter," he said.

Indian bankers participating in an interactive sessions with Crockett, pitched for a different set of capital adequacy, asset classification and provisioning norms keeping in mind the stable economic environment and the government ownership of the public sector banks.

Corporation Bank chairman Cherian Varghese also sought concessions for the "community" banks which are not able to access the market to raise capital.

Crockett, however, said the PSU banks cannot be treated differently. "The ownership structure cannot determine these things. They will create a distorted playing field. Besides, there is moral hazards," he said.

According to hi, the principles governing risk management and capital should be the same but those banks which are not very large and not internationally active may possibly do not need huge capital which others do.

Reserve Bank of India governor Bimal Jalan said the developing countries cannot have a different set of principles for their banks. "The safety considerations everywhere should be the same. After all the banks are dealing with other people's money. Are the developing countries different? No. They should be subjected to the same set of principles to safeguard money," he said.

Jalan also ruled out the theory of "compassionate" banking. "Yes, India is a poor country. There are farmers and others to be supported. But we have parliament to do this job. The banks cannot do compassionate banking as they are handling others money," Jalan said while answering a question of a banker.