v leeladhar : demystifying basel ii special address by mr v leeladhar, deputy governor of the reserve bank of india, at the ficci - iba conference on “ global banking : paradigm shift ”, mumbai, 26 september 2006. * * * friends, it gives me great pleasure to share my thoughts on some of the elements of basel ii implementation in india with this august gathering. i firmly believe that periodical sharing of thoughts and views by us on issues of topical relevance with bankers - both domestic and foreign ; eminent bank regulators and supervisors from abroad ; and above all - the users of the banking system, is fundamental for promoting greater transparency and understanding of the intent and purposes of various regulatory initiatives. i, therefore, would like to thank the organizers for giving me this wonderful opportunity to take this process forward. reserve bank ’ s association with the basel committee on banking supervision ( bcbs ) – the owner of the basel ii framework - dates back to 1997 as india was among the 16 non - member countries that were consulted in the drafting of the basel core principles. reserve bank of india became a member of the core principles liaison group in 1998 and subsequently became a member of the core principles working group on capital. within the working group, rbi has been actively participating in the deliberations on the basel ii framework and had the privilege to lead a group of six major non - g - 10 supervisors which presented a proposal on a simplified approach for basel ii to the committee. the subject matter for our discussion today is “ demystifying basel ii ”. all of you will agree that we would be able to demystify something which is a mystery in the first place. i am not sure how many will agree that basel ii is a mystery. since i personally believe that basel ii is not a mystery, my assignment becomes more challenging. at the outset we may agree that while basel ii - as a framework - might not be a mystery, some elements of the framework might be a mystery for some people. i, therefore, propose to deal with certain specific elements of the basel ii framework, which has been a challenge to us - and we might not be alone in that respect. i believe a better understanding of the relevant perspectives among banks, regulators, users of the banking system and other market players would be useful for an effective and meaningful implementation of basel ii. approach to reforms with the commencement of the banking sector reforms in the early 1990s, the rbi has been consistently upgrading the indian banking

household credit was the main driver of bank credit, growing by 11. 8 per cent in september 2023 relative to 12. 2 per cent in july 2023. housing loan growth decelerated, rising at an annual rate of 12. 8 per cent in september 2023 from 18. 4 per cent in june 2023. corporate credit rose by 2. 8 per cent in september 2023, compared to 4. 4 per cent in july 2023, suggesting that growing earnings was supporting the funding requirements of the corporate sector. the credit portfolio of the banking sector remained sound. the npl ratio of the banking sector was estimated at 4. 7 per cent in september 2023, up from 4. 6 per cent in june 2023. the npl coverage ratio stood at 53. 2 per cent in september 2023. banks maintained ample capital and liquidity buffers. the aggregate capital adequacy ratio ( car ) was at 20. 3 per cent in september 2023, well above the minimum regulatory requirement. the liquidity coverage ratio ( lcr ) of the banking sector also stood above the regulatory floor of 100 per cent, with aggregated lcr at 278. 9 per cent in september 2023 while the lcr for material foreign currencies was 213. 1 per cent. 6 / 9 bis - central bankers'speeches the bank's stress test results showed continued resilience of the banking sector, based on its upgraded framework. the new stress testing framework includes forward - looking elements and new modules to cater for evolving macrofinancial conditions. as the domestic economy expands further, banks are expected to consolidate their buffers to absorb potential shocks. the bank continues to monitor risks to the stability of the financial system, while focussing on its price stability mandate. mauritius investment corporation ( mic ) before i come to the mpc decision, let me quickly underscore the pivotal role played so far by the mauritius investment corporation ( mic ) in our economy. as you may be aware, the mic has played a key role in assisting systemic corporates in their recovery process post - covid, thereby safeguarding the safety, soundness and stability of the financial system of mauritius. it has also played an important part in the bank's investment strategy and in diversifying the bank's portfolio. i am pleased to enlighten you that the entity has performed well during the financial year 2022 - 2023. from inception to 30 june 2023, mic