in the system. it may get further help from easing commodity prices and growth returning in some parts of the globe. our concern on restructuring is more around the fairness of the process. it should address the problem, not merely postpone it. hence, rbi has set out clear guidelines that a second round of restructuring would lead to automatic classification of the asset as non - performing and call for a higher provisioning requirement. ii ) capital adequacy of banks 15. there have been numerous discussions on the need and ability of the indian banks to raise additional capital to support their business, going forward. i would not say that the concerns raised in this regard are entirely misplaced, especially for the public sector banks. the need to shore up capital adequacy would arise on account of pulls from several directions. these include need for higher provisioning requirements due to deterioration in asset quality, phased implementation of basel iii capital norms, capital required to cover additional risk areas under the risk based supervision framework as also the need to expand the business and meet the likelihood of higher credit demand going forward. let me tell you that at present, the capital position of indian banks is comfortable with all of them meeting the extant regulatory requirement comfortably. the capital to risk weighted assets ratio ( crar ) for indian banks under basel iii as at end march 2014 stood at a comfortable level of bis central bankers ’ speeches 12. 9 per cent. while the ratio for the psbs was lower at around 11. 38 per cent, the ratio in case of private sector and the foreign banks was in excess of 16 per cent. going ahead, the capital position of the banks, especially the psbs, is likely to come under some strain, both in terms of quantity and quality. to meet minimum capital requirements, capital buffers, domestically systemically important banks ( dsibs ) surcharge and impact of increased stressed assets, the government ’ s contribution to the equity up to march 31, 2019, would have to be to the tune of two lakh forty thousand crore rupees at the existing level of its shareholding in respective public sector banks. this requirement is independent of the risk based capital requirements which the banks might need under the rbs process. it is, however, important to note that this requirement may come down if, going forward, the asset quality improves on account of higher growth and consequently, higher internal retention. notwithstanding the room available to the banks to meet the basel iii timeline, the banks have

past or future financials. 29. further, the underlying objective of the proposed issuance of small finance banks licenses is to facilitate provision of credit to small and hitherto credit starved sections of the society, which has been relying on informal finance channels. v ) differential licensing of banks 30. rbi has announced licensing of two new banks in the private sector. simultaneously, issuance of guidelines for differentiated licences for small finance banks and payment banks are in the final stages. possibility of continuous or “ on - tap ” licensing, setting up of wholesale banks and conversion of large urban co - operative banks into commercial banks were detailed in our consultation paper issued earlier. discussions on these ideas are currently underway and a detailed road map of the necessary reforms and regulations for freeing entry and making the licensing process more frequent will be issued in due course. bis central bankers ’ speeches while these possibilities encourage much optimism, they are simultaneously likely to place strain on our supervisory resources, which we are internally trying to strengthen and optimize. as these banks are likely to cater to small and relatively uninformed borrowers, protection of consumer interest would also pose a big challenge. 31. in conclusion, i would like to say that while challenges remain for the sector, a host of opportunities also await the indian banks and they have to be geared up to seize these opportunities. rbi ’ s regulatory and supervisory stance is oriented towards facilitating strengthening of the sector in terms of best practices, processes and structure. neither overindulgence nor over caution are on our policy menu card. i once again thank the organizers for inviting me here today and wish the deliberations all success. thank you. bis central bankers ’ speeches