What changed
This master circular updates the July 2009 version by incorporating all instructions issued up to June 30, 2010. It consolidates guidelines on capital components, credit risk, market risk, and capital charge computation. The circular clarifies that these Basel I norms are now only relevant for computing the prudential floor on capital under the Basel II framework.
What it means for you
For Indian banks, this circular serves as a reference for the minimum capital floor requirement under Basel II. Banks must continue to compute their capital adequacy ratio using Basel I rules as a floor, until further notice. This ensures a safety net during the transition to more risk-sensitive Basel II norms.
What you must do
- Ensure your bank's capital adequacy calculations include the Basel I prudential floor as per this circular.
- Report capital adequacy in the format prescribed in Annex 12 of the circular.
- Update internal systems to reflect the consolidated instructions up to June 30, 2010.
- Train compliance teams on the continued applicability of Basel I norms for floor computation.
Who it affects
All commercial banks in India (excluding Regional Rural Banks), Risk management and compliance departments, Treasury and capital planning teams
Why is RBI still issuing Basel I circulars after Basel II implementation?
Banks migrated to Basel II from March 31, 2009, but RBI requires a prudential floor on capital using Basel I norms. This circular consolidates those floor requirements until further advice.
Does this circular apply to Regional Rural Banks?
No, the circular explicitly excludes Regional Rural Banks (RRBs) from its scope.
What is the key change from the previous master circular?
This version updates the July 2009 circular by incorporating all instructions issued up to June 30, 2010, ensuring a single reference document for Basel I floor norms.