Mumbai: RBI has set minimum leverage ratio to 3.5 per cent for banks and at 4 per cent for systemically important banks like State Bank of India, ICICI Bank and HDFC Bank in order to mitigate risks of excessive leverage under Basel III leverage ratio (LR) and financial stability.
Basel III norms are part of an international regulatory accord for the banking sector. Under Basel III, banks are required to maintain proper leverage ratios and meet certain minimum capital requirements.
Currently, the leverage ratio framework put in place by the RBI states that the banks have been monitored against a indicative leverage ratio of 4.5 per cent.
In another development RBI has decided to constitute an Internal Working Group to review comprehensively the existing liquidity management framework and suggest measures.
“The Group will look at simplifying the current liquidity management framework; clearly communicate the objectives, quantitative measures and toolkit of liquidity management by the Reserve Bank. The Group is expected to submit its report by mid-July 2019,” the central bank said.
