% may be seen in the above context. moreover, in an economy whose financial system is dominated by banks, one has to build more resilience than if it were not the case. we have also announced two banks as dsibs based on the criteria of size, interconnectedness, complexity and substitutability. 20. i must add here that the recent regulatory consistency assessment programme of the bcbs did find our regulations to be fully compliant on all issues relating to capital. such an affirmation that the banks are working in a regulatory environment consistent with global standards is an assurance to the international financial system that they can do business with indian banks like with any other. it would be instructive to quote the bcbs chairman2 here “ i would like to remind you that the basel framework is a minimum standard and members are free to go beyond the minimum. we actually encourage that, and most jurisdictions have adopted minimum requirements that exceed the global standard. super - equivalences are often found in developing and emerging market economies, where banks have a higher risk profile. the local regulators therefore set higher minimum requirements ”. basel iii implementation : progress, pitfalls, and prospects : keynote speech by mr stefan ingves, chairman, basel committee on banking supervision and governor, sveriges riksbank at the high - level meeting for the americas, lima, peru, 3 – 5 november 2014. bis central bankers ’ speeches incidentally, it may also be appreciated that we are not the only jurisdiction having prescribed a higher minimum capital standards. several other jurisdictions, particularly asian countries, have proposed higher capital adequacy ratios under basel iii as may be seen from table. 21. let me conclude now. i began by saying why it is necessary to implement basel iii in india. i looked at the various challenges that it brings but argued that we cannot see any challenge in isolation. the basel rules seek to make banks more resilient and risk aware. such a banking system is always better than an unstable one. we cannot overlook the fact that a crisis is better prevented than faced because the aftermath of the crisis is costlier than the incremental cost that one incurs to prevent it. i suppose the deliberations in today ’ s meet would not be oblivious to this reality. let me thank you for your attention. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches

first element in this debate was whether we needed basel iii at all for a country like india. on this, dr. subba rao, the then governor of rbi1 made an interesting point and i quote him : “ one view, although not explicitly spelt out in that form, is that india need not adopt basel iii, or should adopt only a diluted version of it, so as to balance the benefits against the putative costs. to buttress this view, it is argued that basel iii is designed as a corrective for advanced economy banks which had gone astray, oftentimes taking advantage of regulatory gaps and regulatory looseness, and that indian banks which remained sound through the crisis should not be burdened with the “ onerous ” obligations of basel iii. basel iii in international and indian contexts ten questions we should know the answers for – inaugural address by dr. duvvuri subbarao, governor, reserve bank of india at the annual ficci – iba banking conference at mumbai on september 04, 2012. bis central bankers ’ speeches the reserve bank does not agree with this view. our position is that india should transit to basel iii because of several reasons. by far the most important reason is that as india integrates with the rest of the world, as increasingly indian banks go abroad and foreign banks come on to our shores, we cannot afford to have a regulatory deviation from global standards. any deviation will hurt us both by way of perception and also in actual practice. the “ perception ” of a lower standard regulatory regime will put indian banks at a disadvantage in global competition, especially because the implementation of basel iii is subject to a “ peer group ” review whose findings will be in the public domain. deviation from basel iii will also hurt us in actual practice. we have to recognize that basel iii provides for improved risk management systems in banks. it is important that indian banks have the cushion afforded by these risk management systems to withstand shocks from external systems, especially as they deepen their links with the global financial system going forward. ” 6. once we take this postulate for granted, and in fact it needs to be, let us see what the challenges are : capital what are the factors that lead to higher capital? 7. the first set of basel iii reforms agreed in later part of 2010 tackled the issue of numerator part of regulatory capital ratio. while minimum total capital requirements were kept unchanged at 8 % of the rwa, the definition of various components