The Basel III Norms: Costs Of Implementation

Pritha Mukhopadhyay, Symbiosis Law School, Pune

ABSTRACT

The Basel Norms were initiated as a precautionary move in the Banking and Financial Sector to lessen the financial risks involved in the Banking business. The Basel Committee on Banking Supervision (BCBS) was set up in 1974 by a group of central bank governors after the event of a messy liquidation of the Herstatt Bank in Frankfurt. This drew into focus the aspects of deterioration of asset quality of banks, the banking sector distress, the dilemma of balancing profitability and stability, thereby giving way to the Basel Capital Accord of the Bank for International Settlement (BIS) in 1988. In India, the Basel norms were introduced only in 1992, after the wave of LPG (Liberalization, Privatization, Globalization) hit India in 1990. Ever since, the Basel norms have been implemented in a phased manner India, in three parts, namely the Basel I, Basel II and Basel III. Yet, the question arises whether implementation of the Basel accords in a newly globalized, open economy like that of India at par with the well-established Neo-liberal Capitalist markets of the world (rather the West) has caused to improve the economy or pushed it farther into the abys of peril.1 This paper delves into the impacts implementing the Basel III norms in India in order to investigate this question.