Dissertation

“Issues and Challenges faced in the implementation of Basel III in Indian Banks”

. The following project is carried out to initiate research on the Issues and Challenges faced in the Implementation of Basel III in
Indian banks.

1.2 Research Focus

The study here aims at bringing forward the primary issues faced by the Indian Banks in the implementation of newer and
stringent capital and liquidity standards. The study also includes the findings of the primary research, an attempt has been made to
chalk out (as clearly as possible) the additional requirements under Basel III and assess the preparedness level of Indian banks.

1.3 Research Objectives

 To evaluate the present guidelines issued in respect of the Basel I, Basel II and III norms by RBI and suggesting various
measures to work out a plan that lacked in Basel II, which synchronises with implementation plan of Basel III in Delhi
Branch of the Indian banks.

 To study the present capital requirement standards and introduction of global liquidity standards into present capital
structure base.

1.5 Research Rationale

The assets in a banking entity are generated through the intermediation process by accepting deposits; the principal
function of banks which is itself a source of liquidity and credit risks. Apart from this, banks are also exposed to different market
and non-market risks while performing their functions. Thus, the crucial role of capital in the context of banks is to meet the
uncertain losses arising because of portfolio choice of banks and for safeguarding the money of depositors. For addressing all
these issues and forms of risks within the banking industry, the Basel Committee issues a document series for addressing
specifically counterparty risks concerning derivative transactions, market risk framework and enhancement of liquidity risks
(Jayadev, 2013). Evolution of Basel III as a global regulatory framework aimed to strengthen worldwide liquidity and capital
regulations with the ultimate purpose of promoting an exceedingly resilient banking sector worldwide and improve the potential
of the sector to absorb shocks emerging from economic and financial stress. However, the more stringent norms for capital and
liquidity standards have raised challenges for the Indian banks (Jayadev, 2013).

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 Indian banks indulge in business with different organisations across the world and in the same manner foreign banks
come to Indian Shores for fulfilling business purposes. Domestic Lenders such as banks cannot afford to have regulatory
deviations from global standards, as it will harm their business and ultimately increase their borrowing requirement thus
obstructing sustainable business growth in the era of globalisation, making abidance with Basel III requirement pivotal for Indian
banks. However, many banks in India cannot adhere to low global standards, as this will put them in a disadvantaged position n
the global business scenario characterised by fierce competition (Balasubramaniam, 2012). In this regard, the focus of the current
research is on illuminating and examining diverse issues Indian banks are facing while working to abide by the provisions listed in
Basel III, as there is enormous scope for discovering new information in this relation. Accordingly suitable set of
recommendations can be designed which can help banking entities to make lucrative use of Basel III for augmenting the quality
and level of capital by strengthening regulation for capital and liquidity requirement thereby encouraging resilient banking
industry.

1.6 Research Questions

The key question of the research is stated as:

RQ1.“What are the issues and the challenges that are faced by the Indian Banks while implementing Basel III?”

In order to develop a comprehensive piece of research, following questions are also addressed in this particular research project:

RQ2.. What are the steps that the banks need to follow in order to mitigate the issues involved that are most fundamental in its
implementation mainly capital and liquidity requirements?

RQ3. What are the capital requirements and liquidity maintained by Delhi Branch of State Bank of India(SBI), Punjab National
Bank(PNB), Oriental Bank of Commerce(OBC) and Punjab and Sind Bank(PSB)?

RQ4. What are the sources and costs of additional capital?

1.8 Scope of the study

The present research can help Indian banks in identifying the critical issues and challenges associated with the implementation of
Basel III and determining suitable measures for resolving the identified challenges. The focal points of the research fare listed
below:

 Study of the provisions of Basel I, II, 2.5 and recognising, what is lacking in implementing Basel III in an exploratory
manner.

 Studying the capital requirements as on date and what capital needs need to be met, either by government intervention or
bank borrowings for facilitation of Basel III implementation in Indian banks, with specific reference to Delhi based
banks.

 Suggestion of measures to RBI, Delhi Banks basis the dissertation objectives.

1.9 Dissertation Roadmap

Chapter 1: Introduction: This chapter sets the sail for the thesis. It would describe the Research Focus/Aim, Research
Objectives, Research Scope, and the Research questions for which the study has been taken up.

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Chapter 2: Literature Review

This chapter will define the previous works existing on the study under research, which might or might not be 100% in conformity
with the reseacher’s point of view.

Literature literally defines what has already been spoken, written and published on the topic.

Literature Review here is represented as an in depth study on Basel III, so as to nail it down into pieces.

Chapter 3: Methodology

The methods used to come close to the objective of the study shall be defined here viz., the research philosophy, data collection
methods, and some other aspects that were used to define the territory of the research under consideration.

Chapter 4: Findings and Analysis

In this chapter, I will be documenting the qualitative and quantitative analysis of data. The results of the interview shall be
presented in this chapter. This section of the research to the critical to the market / practical implications of the selected topic.

Chapter 5: Conclusions and Recommendations

The achievement of the research objectives shall be documented in this chapter. It will give us a direction and way of interpreting
the conclusions being drawn so as to build a plan in confirmation with the focus of the research.

The conclusion shall also be shared here in this chapter.

Chapter 6: Reflection

Here I shall write my experiences of conducting a research and what impediments I could cross and which couldn’t be crossed,
both in doing my Dissertation and my MBA-Finance as a whole.

1.10 Contribution to the study

The research being conducted will be beneficial in removing the doubts that Basel I, II and 2.5 pose and hence, would be a step
closer to understanding the factors that need even more concentration so as to get near the understanding of Bank’s
implementation stage, as though you only are going to suggest the measures that needs attention, which of course isn’t in the
scope of the study.

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Chapter 2: Literature Review
Overall, the literature review chapter provides critical and in-depth analysis of reliable information available in secondary sources
such as books, peer-reviewed journals and government website related to Basel I, II, 2.5 and Basel III implementation and types of
risks covered via the regulations and several risks involved in banking operations. The Basel III take its basis in because Basel I, II
and 2.5 would not work to curb Delhi Banks from the next financial crises as it did not curb even from the 2008 financial crises.

2.2 Overview of the Key Literature Sources

In the research paper titled “Capital Ratios predictors of Bank Failure “, the authors have conducted an analysis of different capital
ratios namely leverage ratios and ratios of capital to gross revenue to indicate the bank failure. They state that these ratios along
with more complex ratios such as risk weighted ratio’s that take 2-3years horizon also predict the same failure that bank will go
through-Though it is an old reference, it holds important information.

In another research titled “Basel I, Basel II and Emerging Markets: A non-technical Analysis “, the author has thrown light on the
imperfections and faults in the existing Basel Norms existent at the time of nearly the 2008. Sub-prime mortgage crises in the
United States. He mentions that the very strength of both the quantitative and technical focus, limits the understanding of the
arguments within the policy arrangements, causing them to be misinterpreted by people and take wrong decisions when it comes
to policy framework.

In another research work titled, “Basel III: Implementation: Issues and challenges for Indian Banks”, he first lays the content of
Basel III in Indian Banking Context, and then inculcates the views of the senior executives of Indian Banks on implementing the
Basel III framework, especially in areas of growth vs financial stability, cost of credit, deposit pricing and maintenance of liquidity
standards

2.3 Evaluation of Basel I Regulations with respect to RBI Guideline

2.3.1 Objective of the Basel I Accord

It has been explored that the main objective of Basel regulations was to develop a common solvency ratio (now we know it as
(‘Capital Adequacy Ratio‘) to be applied to credit institutions in the Community. The framework (Basel I) was mainly directed
towards assessing capital in relation to credit risk (the risk of counter-party failure). Moreover, after 1974 liquidation of the
Cologne-based Bank Herstatt, Basel Committee decided to form a cooperative council for harmonising banking standards and
regulations within and between all member states. Overall, efforts of the Basel Committee were directed towards extending
regulatory coverage and promoting efficient banking supervision along with ensuring proper supervision of all the financial
institutions for further promoting transparency and fair practices in the banking sector (Research.policyarchive.org, 2008).

2.3.2 Investigation into the Coverage of Basel I Accord

It is noted that the agreement was applicable to the banks on a consolidated basis, including subsidiaries undertaking banking and
financial business. Smooth adaptation and implementation of Basel I norms was witnessed in the Basel Committee states.
However, Japan could not immediately implement Basel I regulations due to economic downfall of the late 1980s. A ll Basel
Committee members implemented Basel I‘s recommendations—including the 8% capital adequacy target—by the end of 1992.
Japan later harmonized its policies with those of Basel I in 1996. Although they were not intended to be included in the Basel I
framework, other emerging market economies also adopted its recommendations. In contrast to the pointed warnings written into
Basel I against implementation in industrializing countries, the adoption of Basel I standards was seen by large investment banks

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as a sign of regulatory strength and financial stability in emerging markets, causing capital-hungry states such as Mexico to
assuage to Basel I in order to receive cheaper bank financing. By 1999, nearly all countries, including China, Russia, and India,
had—at least on paper—implemented the Basel Accord, popularly which came out to be known as Basel I
(Research.policyarchive.org, 2008).

It has been noted in the Basel I regulations were largely applied across all the major investment banks in all the nations
worldwide.

2.3.3 Categories of Risk Captured in the Framework (i.e. Initial Basel I framework)

The central focus of the framework was Credit risk and, as a further aspect of credit risk, country transfer risk. No
standardisation had been attempted in the treatment of other kinds of risk in the framework at that stage and it was concluded
that individual supervisory authorities should be free to apply either a zero or a low weight to claims on governments.

Target standard ratio

(Research.policyarchive.org, 2008)

The Committee came out with the target standard ratio of capital to weighted risk assets at 8%(of which the core capital
element will be at least 4%), a common minimum standard which international banks in member countries were expected to
observe by the end of 1992.

2.3.4 Critical Analysis of the Key Prescription of Basel I capital norms:

Key Prescription of Basel I capital norms:

Constituents of Capital

Paid-up share capital/common stock

Tier I
Disclosed Reserves

Perpetual non-cumuliative preference shares

Undisclosed Reserves

Asset Revaluation reserves

Tier 2
General Provisions/ General Loan-Loss Reserves

Subordinated Debt

Hybrid(Debt/Equity) capital Instruments

The sum of tier 1 and tier 2 elements will be eligible for inclusion in the capital base, subject to the following limits:

It is examined that the sum of tier 1 and tier 2 elements will be eligible for inclusion in the capital base. However, some limits and
restrictions are also outlined in Basel I capital norms.

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Summary of Basel I prescriptions: (Cbrc.gov.cn, n.d.)

Minimum Standard 8%
Measurement Formula Core elements plus 100% (4% plus 4%)

Supplementary elements included in core None

Limit on general loan-loss reserves in supplementary 1.25 percentage points or, exceptionally and
elements temporarily up to 2.0 percentage Points

Limit on term subordinated debt in supplementary Maximum of 50% of tier 1

elements

Deduction for goodwill Deducted from tier 1

Coverage Credit Risk only

It has been analysed from the prescription of Basel I norms that these norms solely covered credit risk in regard to the
banking sector.

2.4 Analysis of the Major risks involved in the Banking Operations (Cbrc.gov.cn, n.d.)
In the viewpoint of EduPristine (2013), various risks such as credit risk, operational risk, market risks, reputational risk,
credit concentration risk, off-balance sheet exposures and securitisation risk and liquidity risks are some of the major risks
involved in the banking operations. Additionally, these risk highlight the areas of banking operations require to be properly
regulated and supervised (EduPristine, 2013). As per EduPristine (2013),credit risk refers to the risk of loss of principal or loss of
a financial reward due to borrower's failure to repay a loan or otherwise meet a contractual obligation. Credit risk arises whenever
a borrower is expecting to use future cash flows to pay a current debt (EduPristine, 2013). On the other side, any risk of loss

arising due to failed internal processes, inefficient systems and legal risk come in the category of operational risks (Sy, 2005).

It has been stated that banks have always been exposed to such type of risk. However, increase in the products in the
banks‘ portfolio, increasingly unstructured nature of the banking products, wide fluctuations in the exchange markets, rapidly
changing ethical environment and the excessive dependence on the automated systems have contributed to more observable
exposures of this type of risks. In this relation, market risk refers to the risk of losses in on and off-balance-sheet positions arising

from movements in market prices (Sy, 2005). Moreover, the reputational risk is highlighted a crucial component
for the institutions functioning in the banking sector as customers and investors' perceptions significantly
contribute in maintaining and enhancing organisational integrity. When customers select an organisation to
manage their wealth and financial transaction, they have a few essential expectations for instance protection
of privacy, timely conduction of transactions, reliable advice and appropriate investment of their assets &
consistent achievement of financial goals within their risk appetite (Balasubramaniam, 2012).

In order to provide consistent service quality and increase cross-selling of services banks have been employing the strategy of
using Relationship managers. One perceptible flaw in the current strategy of the banks is that in most of the cases there is a direct
correlation between the compensation of such relationship managers and the total revenues paid by the client, which leads to a
natural conflict between trying to increase his/ her compensation and holding firmly to the Bank's established standards. In a
similar instance, the major reason behind the breakdown of Arthur Anderson was the serving of the engagement partners as the
relationship managers and absence of quality assurance mechanism. Apart from this, credit concentration risk is known as the risk

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concentration is any single exposure or a group of exposures with the potential to produce losses large enough (relative to a bank‘
s capital, total assets, or

Advantages:

a. Risk weighting effectively requires financial institutions to charge more capital for riskier assets, thereby
discouraging the holding of risky assets

b. Risk-weighted ratio better distinguishes between risky and safe banks and should be a more effective predictor
of bank failure than simple ratios.

Disadvantages:

a. Each loan is unique and it is difficult to evaluate accurately, the credit risk of bank assets.

b. Banking business is subject to significant sources of risk other than credit risk, such as interest rate risk,
operational risk, and reputational risk. Weighting assets can weaken the relationship between the capital ratio
and these other risks—operational risk in particular.

c. Furthermore, the financial sector is so dynamic that new products are introduced continuously. Even a well-
designed risk-weighting scheme may soon become obsolete as new instruments provide means of economizing
on regulatory capital.

2.6 Criticisms of Basel I:

Criticisms of Basel I:

Coverage of credit risk only

Ommissions
Ommission of market discipline

Over Generalisation of capital norm

No Clarity regarding
implementation Over Sale of Basel I

Scope for Through Sale and Resale of Non-OECD Bank

manipulation Debt

Through Securitization

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 Application to Emerging Movement of Bank Holdings from OECD to
Markets higher yielding domestic sources

Underestimation of the credit default risks

Omissions

It has been critically evaluated that omissions such as coverage of credit risk only, elimination of market discipline and lack of
clarity in its implementation restricted its applicability and obtaining its desired benefits. It is examined that Basel I only covers
credit risk and only targets G-10 countries, Basel I had been seen as too narrow in its scope to ensure adequate financial stability
in the international financial system. Further, omission of market discipline is viewed as to limit the ability of accord to influence

countries and banks to follow its guidelines (Research.policyarchive.org, 2008). On the other side, the second group of
criticisms deals with the way in which Basel I was publicized and implemented by banking authorities. The inability of these
authorities to translate recommendations under Basel I properly into layman language and the strong desire to enact its terms
quickly caused regulators to over-generalize and oversell the terms of Basel I to the G-10‘s public (Balasubramaniam, 2012).
This, in turn, created the misguided view that Basel I was the primary and last accord a country needed to implement to achieve
banking sector stability. While G-10 regulators saw this result as rather benign because they already had most of the known
regulatory foundations for long-term growth in place, they did not realize that the ―Over sale‖ of Basel I would influence large
private banks in such a way that they would begin to demand that emerging market economies follow Basel I.

It is also asserted that scope for manipulation also found in the compliance with Basel I norms
(Research.policyarchive.org, 2008). Due to the wide breath and absoluteness of Basel I's risk weightings, banks have found
ways to “wiggle” around Basel I‟s standards to put more risk on their loan books than what was intended by the framers of the

Basel Accord.(Research.policyarchive.org, 2008). Further, underestimation of credit default risk also influenced
the efficacy of Basel norms. Other than this, under securitisation strategy banks securitise their corporate loans and
sell off the least risky securitised assets. By ―splicing‖ the least risky bank loans from its loan-book, a bank makes its assets more
risky in de facto terms, but, in the de jure terms of Basel I, the risk weight given to the bank‘s corporate loans does not change.
Moreover, the money gained through this securitisation can be added to a bank's asset reserves, allowing it to give out even more
risky loans. This method—called ―cherry picking‖—creates banks that, on paper, are properly protecting themselves against
credit risk, but in reality are taking on quantities of risk far greater than what Basel I intended.

Impact of capital regulation on the emerging markets:

(Research.policyarchive.org, 2008)

Although Basel I was never intended to be implemented in emerging market economies, its application to these economies under
the pressure of the international business and policy communities created foreseen and unforeseen distortions within the banking
sectors of industrializing economies.

Movement of bank holdings from OECD to higher-yielding domestic sources- (Research.policyarchive.org, 2008)

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As highlighted in the Basel Accord itself, Basel I‘s high degree of regulatory leeway, view of domestic currency and debt as the
most reliable and favourable of asset instruments, and perception of FDIC-style depositor insurance as risk-abating had significant
negative effects within emerging economies. In countries subject to high currency fluctuation and sovereign default risks, the
Basel I accords actually made loan-books riskier by encouraging the movement of both bank and sovereign debt holdings from
OECD sources to higher-yielding domestic sources.

Underestimation of the credit default risks (Research.policyarchive.org, 2008)

FDIC-style deposit insurance, combined with lax regulation on what assets fall under Basel I‘s risk weightings, caused emerging
market regulators to underestimate the credit default risks of a bank‘ s assets . This, in turn, created system-wide defaults within
emerging market banking sectors when it became obvious that all banks had taken on excessive risk and when it was revealed that
the country‘ s central bank had the capital on hand to bail out some of the banking sector, but not enough to bail out the whole of
the sector.

It has been noted that issues such as the credit default risks, similar risk -weighting for sovereign debts of OECD and

Non-OECD countries and adverse influence on emerging markets are associated with Basel I regulations ( Van Greuning and
Brajovic Bratanovic, 2009).

 capital norm the ability to absorb shock of the banking sector from the financial and economic will get improved.

According to Subbarao (2012) the norms laid down by the RBI for the Indian banks (lenders) have to maintain the certain amount
of common equity ratio that is of 8% as well as the total capital ratio of 11.5% by 2019. The RBI guidelines require Indian banks
to administer a Minimum Total Capital of 9% against the internationally prescribed limit, that is 8% by the Basel Committee of
the Total Risk-Weighted Assets. However, with the implementation of this limit Banks will be required to raise more capital in
comparison to what was mandated by Basel II as various items are excluded in the novel definition thus creating a new challenge
for the Indian banks (Subbarao, 2012).

Basel III is the third series of Basel accord. This regulatory framework is developed in order to deal with the risk management
phase of the banking sector. According to , the main criteria of the Basel III include the adequate amount of capital for the banking
sector which will be help in dealing in case of unforeseen events. The new guidelines of the Basel III will ensure that the banking
sector is well capitalised in order to manage all kinds of risk. It is the global regulatory framework for banks and the banking
sector with the main aim to improve the banks’ ability to absorb shocks that will arise from the economic downturn, as well as,
from the financial stress. The Basel III requires all the Indian banks to hold capital that will be equal to the 8% of their assets in
order to adjust it with their risk which will automatically help in improving their financial stability. In this study the

In this relation Kumar et al. (2012), stated that with the help of the new norms related to the capital needs outlined under Basel III,
the Indian banks will be pushed from $ 20 billion to $30 billion as the banks will require more funds to undertake an equivalent
level of business (Kumar et al., 2012). Therefore, it is assessed that the Indian banks will experience increased pressure with the
enforcement of new regulatory norms in regard to the capital requirements, for which appropriate measures need to be employed
to avoid any implication on operational efficacy.

Pillar-1: Minimum Capital Requirements (INSIGHTS, 2017)

Reserve Bank of India (Central Bank of India) has been monitoring the progress of other countries on Basel III implementation,
the prospective problems on account of implementation of such guidelines and the preparedness levels of the Indian banks. After
considering all the relevant factors, RBI had postponed the start date of the Basel III implementation from 01 Jan 2013 to 01 April
2013 originally and now has shifted the same to 31 March 2019 and are in talks to shift it even further due to the changes in the
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Banking Industry be it the introduction of Goods and Services Tax and /Or Demonetization in the country. What has given shivers
to the Indian banks is the additional ‘Good quality capital’ and ‘stringent liquidity standards’ mandated by the new norms. The
analyses here is the various requirements under the three pillars of Basel III guidelines and the issues faced by the Delhi(Indian)
banks in the implementation of the new norms.

Since, the purpose of our research objectives is restricted to capital and liquidity requirements of Basel IIII, we shall concentrate
only on the First Pillar of Basel II. (As mentioned in the figure above)

Applicability: (INSIGHTS, 2017)

The Basel III framework will be applicable both at the level of consolidated bank as well as at the level of stand-alone bank.
Accordingly, overseas operations of a bank through its branches will be covered in both the scenarios.

A bank shall comply with the capital adequacy ratio requirements at two levels: (Centralbankbahamas.com, n.d.)
(Rbnz.govt.nz, 2012) (Centralbankbahamas.com, 2015)

(a) The consolidated (“Group”) level capital adequacy ratio requirements, which measure the capital adequacy of a bank based on
its capital strength and risk profile after consolidating the assets and liabilities of its subsidiaries except those engaged in
insurance and any non-financial activities; and

(b) The standalone (“Solo”) level capital adequacy ratio requirements, which measure the capital adequacy of a bank based on its
standalone capital strength and risk profile(Rbidocs.rbi.org.in, n.d.)

Note: Minority interest (i.e. non-controlling interest) and other capital issued out of consolidated subsidiaries that is held by third
parties will be recognized in the consolidated regulatory capital of the group subject to certain conditions.

Under Basel III, the minority interest is recognised only in cases where there is considerable explicit or implicit assurance that the
minority interest which is supporting the risks of the subsidiary would be available to absorb the losses at the consolidated level.

Accordingly, under Basel III, the portion of minority interest which supports risks in a subsidiary that is a bank will be included in
group’s Common Equity Tier 1. Consequently, minority interest in the subsidiaries which are not banks will not be included in the
regulatory capital of the group. In other words, the proportion of surplus capital which is attributable to the minority shareholders
would be excluded from the group’s Common Equity Tier 1 capital. Further, as opposed to Basel II, a need was felt to extend the
minority interest treatment to other components of regulatory capital also (i.e. Additional Tier 1 capital and Tier 2 capital)
(Rbidocs.rbi.org.in, n.d.). Therefore, it has been analysed that under Basel III, the minority interest in relation to other components
of regulatory capital will also be recognised thereby assuring accomplishment of the interest of different stakeholders playing a
leading role in sustainable business development.

Capital Requirements:
Under revised guidelines (Basel III), total regulatory capital will consist of the sum of the following categories:

(Aacb.org, 2017) (Www1.unisg.ch, 2015)

Limits and Minima:

 Common Equity Tier 1 capital must be at least 5.5% of risk-weighted assets (RWAs) i.e. for credit risk + market risk +
operational risk on an on-going basis.

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  Tier 1 capital must be at least 7% of RWAs on an on-going basis. Thus, within the minimum Tier 1 capital, Additional
Tier 1 capital can be admitted maximum at 1.5% of RWAs.

 Total Capital (Tier 1 Capital plus Tier 2 Capital) must be at least 9% of RWAs on an on-going basis. Thus, within the
minimum CRAR of 9%, Tier 2 capital can be admitted maximum up to 2%.

 If a bank has complied with the minimum Common Equity Tier 1 and Tier 1 capital ratios, then the excess Additional
Tier 1 capital can be admitted for compliance with the minimum CRAR of 9% of RWAs.

 With a view to improve the quality of Common Equity and also consistency of regulatory adjustments across
jurisdictions, most of the adjustments under Basel III will be made from Common Equity (Centralbankbahamas.com,
2016)

 Guidelines have been drafted based on the Basel III reforms on capital regulation, to the extent applicable to banks
operating in India. RBI is currently working on operational aspects of implementation of the Countercyclical Capital
Buffer. Guidance to banks on this will be issued in due course of implementation of the new norms. Similarly, guidelines
on new global liquidity standards introduced as part of Basel III (Basel III: International framework for liquidity risk
measurement, standards and monitoring, December 2010) will be issued separately. Thus, for the purpose of reporting
Tier 1 capital and CRAR, any excess Additional Tier 1 capital and Tier 2 capital will be recognised in the same
proportion as that applicable towards minimum capital requirements. This signified that to admit any excess AT1 and T2
capital, the bank should have excess CET1 over and above 8% (5.5%+2.5%) (Www1.unisg.ch, 2015).

Accordingly, excess Additional Tier 1 capital above the 1.5% of RWAs can be reckoned by the bank further to the extent
of 27.27% (1.5/5.5) of Common Equity Tier 1 capital in excess of 8% RWAs. Similarly, excess Tier 2 capital above 2% of RWAs
can be reckoned by the bank further to the extent of 36.36% (2/5.5) of Common Equity Tier 1 capital in excess of 8% RWAs.

It would follow that in cases where a bank does not have minimum Common Equity Tier 1 + Capital Conservation Buffer
of 2.5% of RWAs as required but, has excess Additional Tier 1 and / or Tier 2 capital, no such excess capital can be reckoned
towards computation and reporting of Tier 1 capital and Total Capital.

(Centralbankbahamas.com, n.d.) (Centralbankbahamas.com, 2016)

Under Basel III, banks are required to derecognise in the calculation of Common Equity Tier 1 capital, all unrealised gains and
losses which have resulted from changes in the fair value of liabilities that are due to changes in the bank’s own credit risk. If a
bank values its derivatives and Securities Financing Transactions (SFTs) liabilities taking into account its own creditworthiness in
the form of debit valuation adjustments (DVAs), then the bank is required to deduct all DVAs from its Common Equity Tier 1
capital, irrespective of whether the DVAs arises due to changes in its own credit risk or other market factors. Thus, such deduction
also includes the deduction of initial DVA at inception of a new trade. In other words, though a bank will have to recognize a
loss reflecting the credit risk of the counterparty (i.e. credit valuation adjustments-CVA), the bank will not be allowed to
recognize the corresponding gain due to its own credit risk.

Applicability: Applicable at consolidated and solo levels.

Defined Benefit Pension Fund Assets and Liabilities

(i) Accordingly, under Basel III, defined benefit pension fund liabilities, as included on the balance sheet, must be
fully recognised in the calculation of Common Equity Tier 1 capital (i.e. Common Equity Tier 1 capital cannot be

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 increased through derecognising these liabilities). For each defined benefit pension fund that is an asset on the balance
sheet, the asset should be deducted in the calculation of Common Equity Tier 1 net of any associated deferred tax
liability which would be extinguished if the asset should become impaired or derecognised under the relevant accounting
standards.

Applicability: These rules are applicable at the consolidated as well at the Solo level.

Investments in Own Shares (Treasury Stock)

(i) Investment in a bank’s own shares is tantamount to repayment of capital and therefore, it was considered necessary
under Basel III to knock-off such investment from the bank’s capital with a view to improving the bank’s quality of
capital. This deduction would remove the double counting of equity capital which arises from direct holdings, indirect
holdings via index funds and potential future holdings as a result of contractual obligations to purchase own shares
(EduPristine, 2013)

(ii) In India, banks’ should not repay their equity capital without specific approval of Reserve Bank of India. Repayment of
equity capital can take place by way of share buy-back, investments in own shares (treasury stock) or payment of
dividends out of reserves, none of which are permissible. However, banks may end up having indirect investments in
their own stock if they invest in / take exposure to mutual funds or index funds / securities which have long position
in bank’s share. In such cases, banks should look through holdings of index securities to deduct exposures to own
shares from their Common Equity Tier 1 capital. Following the same approach, banks must deduct investments in their
own Additional Tier 1 capital in the calculation of their Additional Tier 1 capital and investments in their own Tier 2
capital in the calculation of their Tier 2 capital.

New requirements under Pillar I of capital requirements:

Capital Conservation Buffer Banks are required to maintain a capital conservation buffer of 2.5%, comprised of
Common Equity Tier 1 capital, above the regulatory minimum capital requirement of 9%. Banks should not distribute capital (i.e.
pay dividends or bonuses in any form) in case capital level falls within this range (INSIGHTS, 2017). However, they will be able
to conduct business as normal when their capital levels fall into the conservation range as they experience losses. Therefore, the
constraints imposed are related to the distributions only and are not related to the operations of banks.

The Common Equity Tier 1 ratio includes amounts used to meet the minimum Common Equity Tier 1 capital requirement of
5.5%, but excludes any additional Common Equity Tier 1 needed to meet the 7% Tier 1 and 9% Total Capital requirements. E.g.:
A bank maintains Common Equity Tier 1 capital of 9% and has no Additional Tier 1 or Tier 2 capital. Therefore, the bank would
meet all minimum capital requirements, but would have a zero conservation buffer (i.e. the CET1 can either be used to fill the
part of the tier II capital or it may be used as Capital conservation buffer. It cannot be used to play both the roles).

As per the requirements elaborated within Pillar I, Indian banks are also advised to pursue an internal assessment of their level
of planning and preparation for migration in relation to advanced approaches and accordingly take a decision with the consultation
of their respective Boards for identifying whether they would like to adopt any of the advanced approaches. In accordance with
the internal assessment and extent of preparation, an Indian bank is is free to choose a suitable date for applying for incorporation
of the selected advanced approach. However, banks are suggested to invariably take a prior approval of the RBI to adopt any of
the enhanced or improved approaches which is again a modification in the prevalent operational system (RBI, n.d.).

Elements subject to the restriction on distributions: Dividends and share buybacks, discretionary payments on other Tier 1
capital instruments and discretionary bonus payments to staff would constitute items considered to be distributions. Payments
13
which do not result in depletion of Common Equity Tier 1 capital, (for example, include certain scrip dividends) are not
considered distributions.

Solo or consolidated application: Capital conservation buffer is applicable both at the solo level (global position) as well as at
the consolidated level, i.e. restrictions would be imposed on distributions at the level of both the solo bank and the consolidated
group. In all cases where the bank is the parent of the group, it would mean that distributions by the bank can be made only in
accordance with the lower of its Common Equity Tier 1 Ratio at solo level or consolidated level. For example, if a bank’s
Common Equity Tier 1 ratio at solo level is 6.8% and that at consolidated level is 7.4%. It will be subject to a capital
conservation requirement of 60% consistent with the Common Equity Tier 1 range of >6.75% - 7.375% as per below table.
Suppose, a bank’s Common Equity Tier 1 ratio at solo level is 6.6% and that at consolidated level is 6%. It will be subject to a
capital conservation requirement of 100% consistent with the Common Equity Tier I range of >5.5% - 6.125% as per Table on
minimum capital conservation standards for individual bank.

Countercyclical Capital Buffer Further, a countercyclical capital buffer within a range of 0 – 2.5% of RWAs in form of
Common Equity or other fully loss absorbing capital will be implemented according to national circumstances. The purpose of
countercyclical capital buffer is to achieve the broader macro-prudential goal of protecting the banking sector from periods of
excess aggregate credit growth. For any given country, this buffer will only be in effect when there is excess credit growth that
results in a system-wide build-up of risk. The countercyclical capital buffer, when in effect, would be introduced as an extension
of the capital conservation buffer range.

Leverage ratio

During the period of parallel run (from 1 January 2013 to 1 January 2017), banks should strive to maintain their existing
level of leverage ratio but, in no case the leverage ratio should fall below 4.5% (BCBS has recommended a minimum leverage
ratio of 3%). A bank whose leverage ratio is below 4.5% may endeavour to bring it above 4.5% as early as possible. Final
leverage ratio requirement would be prescribed by RBI after the parallel run taking into account the prescriptions given by the
Basel Committee.

The leverage ratio shall be maintained on a quarterly basis. The basis of calculation at the end of each quarter is “the average
of the month-end leverage ratio over the quarter based on the definitions of capital (the capital measure) and total exposure (the
exposure measure)

Note: As prescribed earlier, where a financial entity is included in the accounting consolidation but not in the regulatory
consolidation, the investments in the capital of these entities are required to be deducted to the extent that that they exceed 10%
of the bank’s common equity. To ensure that the capital and exposure are measured consistently for the purposes of the leverage
ratio, the assets of such entities included in the accounting consolidation should be excluded from the exposure measure in
proportion to the capital that is excluded.

Banks are required to calculate their leverage ratio using the definitions of capital and total exposure as defined under
this guidelines and their risk based capital requirement. Bank level disclosure of the leverage ratio and its components will start
from April 1, 2015. However, banks should report their Tier 1 leverage ratio to the RBI (Department of Banking Operations and
Development) along with detailed calculations of capital and exposure measures on a quarterly basis from the quarter ending
December 31, 2012.

Leverage Ratio, across the world:

14
 (Aacb.org, 2017)

How Excessive leverage lead to bank failure: A case of ‘The Northern Rock’: (Aacb.org, 2017)

 Northern Rock was a British bank

 Based at Regent Centre in Newcastle upon Tyne, UK

 The leverage to common equity (i.e. Total/ Common equity exposure) increased to 86:1, if for example.

 A Common equity leverage of 86 means that even 1% change in the total exposure can lead to erosion of 86% of the
common equity

Note: The Leverage Ratio must be disclosed beginning in 2015 and becomes a Pillar 1 requirement in 2018

(INSIGHTS, 2017)

Minimum Capital Conservation Standards for Delhi Banks

Common Equity Tier 1 ratio after including the current period’s Minimum capital conservation ratios(Expressed as a % of
retained earnings earnings)
5.500%-6.125% 100%
>6.125%-6.750% 80%
>6.750%-7.375% 60%
>7.375%-8.000% 40%
>8.000% 0%

2.9.1 Enhancement of Risk Coverage

As per Allen et al. (2012), one of the dominant reasons of the financial crisis has been the necessity to stimulate the risk
coverage of the capital framework. Ineffectiveness in capturing key on and off balance sheet risks along with derivative related
exposures was the critical destabilising factor during the period of crisis. In response to this, Basel III has focused on the
enhancement of the risk coverage of the banks through counterparty credit risk. This will help the bank capital charges becoming
very low during the period of compressed market volatility. The committee is also helping the banks to strengthen the collateral
management. The committee has also assessed various measures to mitigate the risk, which include internal assessment of the
banks in their own in order to eliminate cliff effects argued that enhancement of the risk management is one of the core element of

15
the Basel III counterparty credit risk is also the part of this area (Allen et al., 2012). This is considered as the risk of incurring the
loss due to the default of the counterparty, which is regarded as the specific example of the bilateral credit risk.

The framework of Basel III is being designed in such a manner that will help the Indian banks to overcome the weakness of the
past crises as well as to make the banks more efficient and effective enough in dealing with any kind of crises situation. In order to
enhance the risk coverage the area which got focused was the improvement of the capital of all the Indian banks . This is because,
in addition to Basel II enhancements in July 2009, Basel III requires banks to measure counterparty credit risk by OEM, CEM,
IMM or standardised method. Banks employing IMM to measure exposure for counterparty risks in regard to derivative
transactions will be required to utilise stressed inputs within the Effective Expected Positive Exposure model. On the other side,
banks using standardised approach for credit risk in respect of OTC derivatives are required to add a capital charge for the purpose
of capturing down gradation concerning counterparty before any default in employed approaches (Kumar et al., 2012). In this
relation, Kumari (2013) argued that with the impact of the new norms of Basel III the Indian banks will be able to comply with the
higher capital requirement and that too without infusing any fresh equity.

The RBI has stated that there is the need of the Basel III for the Indian banks as it will help the banks to revive from the financial
shock and because of the increasing rise of the Non-Performing Assets in the economy. In addition, it is also creating the lots of
pressure on the Indian banks as they are unable to recover the loans from the borrowers, which is creating a lot of bad debts for the
country. Therefore it is very important for the Indian banks to have the cushion in order to save from the potential risks.

Roy has opined that the Government of India has taken certain measure in order to implement the scheme they have permitted the
banks to access the markets in order to raise capital with the condition of maintaining minimum 52% shareholding. The
Government has also started the scheme known as the INDRADHANUSH 2.0 (The Economic Times, 2018) in order to
revamp the Public Sector Banks. The aim of the scheme is to improve the competence of the banks thereby reducing the bad
debts.

According to with the effective implementation of the Basel III in the Indian economy the banks will be able to absorb the risk it
will also help the banks to recover from the financial crises of 2008. An effective implementation will contribute in the banks
competitiveness by developing better management (NEWS and News, 2017).

2.9.2 Reducing procyclicality and promoting countercyclical buffers

Shin (2011), investigated that complying with the norms of the Basel committee is the challenging task for the Indians banks.
The basic requirement of the norm is the reduction of the leverage and increase in the capital and liquidity requirements of the
banks. This will help in the increased profit margin of the Indian banks. The basis of the procyclicality aspects the framework will
promote the equity requirement this will help in reduce the possibility of adverse cycle of losses. Secondly the rule will also help
in to limit the procyclicality. The Basel committee is also introducing a number of measures which will make banks more strong
to such dynamics. This will help the banks to tolerate the shock in an easier manner rather than facing the risk and transmitting it
to the financial system (Shin, 2011). However, it is found that one of the most prominent procyclicality dynamics is the failure of
the risk management as well as the capital framework. Therefore, according to, the Basel committee would promote
countercyclical approach which will help in aggregating credit growth. This will also help in reducing the systematic risk of the
banks and this will provide premium supervision for the banks on the adequate capital requirements. The main purpose of the
countercyclical is to achieve macro prudential goals in order to protect the banking sector in times of growth rate.

According to Andersen (2011) that banking sectors in different countries are very much prone to the business cycle. In better
times when the borrowers borrow, loans are repaid well on time and the service of loan entailed by banks in rendered
uninterruptedly. However, in the opposite scenario when the situation is reverse borrowers tends to make the default of the

16
borrowed amount, in such a situation the profits of the banks tend to go down and worst circumstances can even create hurdles in
smooth flow of operational activities (Andersen, 2011).

According to Jayadev (2013), the countercyclical buffers deals in ensuring that the capital adequacy requirements of the banks are
being met. This countercyclical buffer is calculated as the average of the buffers to which the banks are having a credit exposure.
The countercyclical buffers act as an extension to the capital conservation buffer. In this regard, the banks are required to ensure
that the requirements of the countercyclical buffers are calculated and are disclosed publicly (Jayadev, 2013).

The main objective of the countercyclical capital buffers management is two folds:

1. Firstly it requires the banks to build the capital for the good times when they are required to maintain the flow of credit to
the real sector in bad times.

2. Secondly, it thrives to achieve the macro prudent goal in order to restrict the banking sector from indiscriminating
lending in the times of excess credit growth.

2.9 Literature Conclusion

Basel III are the international capital norms, which the government is trying to implement on the Indian banks and trying to
implement the capital into current structure of capital structure with every year paasing until 31/March/2019.. Complying with the
norms of the Basel committee is the challenging task for the Delhi banks. The basic requirement of the norm is the reduction of
the leverage and increasing the capital and liquidity of the banks. With the implementation of the Basel III norm, the Indian banks
will be able to tackle the bad debts. Basel III will help the banks to revive from the financial shock. As the Indian banks are unable
to recover the loans from the borrowers, which is creating a lot of bad debts for the country. Therefore, it becomes very important
for the Indian banks to have the cushion of capital adequacy(CAR) in order to save from the potential risks in the future.

17
Chapter -3: Methodology

3.1 Introduction
Research methodology in a research project is an indispensable element playing a central role in identifying the most
appropriate data collection and evaluation technique. The process of any research or scientific investigation is regulated by
definite research methods and progressed with the incorporation of a specific research methodology framework. The research
methodology offers a blueprint and reasonability supporting the suitability of the selected tools and methods (Denscombe, 2014).
It is essential to know the fact that research methodology of every research project is different as the selection of research
approach, design and tools vary in accordance with the nature of research context and availability of required information sources
(Bryman and Bell, 2015). In this relation, this particular chapter outlines the research philosophy, research design, research
approach, data collection and analysis strategy employed for analysing the key issues witnessed by India banks in the
implementation of Basel III, with a particular focus on Delhi branches for collecting first-hand information to accomplish research
objectives. While determining the research methodology for the present research, emphasises has been also placed on examining
the four sets of major changes in capital regulation since 1988 defined by the Banking Committee on Banking Supervision
(BCBS) that are Basel I, Basel II, Basel 2.5 and Basel III, for making the study comprehensive and extensively contributory.

3.2 Research Design

A research design denotes the wholesome strategy embraced in a research for the purpose of encompassing varied component
of a research in a comprehensible and insightful way thereby addressing the research problem in an efficient manner. It offers an
adequate and holistic blueprint suggesting the manner in which data collection, assessment and evaluation are to be processed and,
it is important to consider research problem while deciding the research design to be followed in the project. The research design
is classified as exploratory design and descriptive design whereby exploratory design is defined as one which helps to draw novel
and updated information regarding the research subject and is commonly applied in the research studies aiming to inspect new
information in the research field having considerable scope to inquire further (Creswell and Creswell, 2017). Descriptive design,
on the other hand, is relatively systematically aligned, less flexible and extensively structured in nature with the high focus on
proceeding the research in a systematic and ordered way. The key contribution of descriptive design to build authenticity of the
research is in terms of restricted influence on the research subject helping to acquire accurate data concerning shared pattern,
behaviour and criterion of the important research variables (Creswell and Creswell, 2017).

In order to examine the major challenges and dominant issues encountered by Indian banks in abiding by Basil III
regulations, the exploratory design has been applied to explore unrevealed information concerning the major challenges witnessed
by banks in enforcing the regulations outlined in Basel III as per the guidelines issued by RBI. To explore the realistic information
essential to deliver a reliable piece of work, Delhi is taken as the research setting wherein the managerial personnels posted in the
Delhi branches of State Bank of India, PNB, OBC and PSB have been approached. The consideration of exploratory design
renders an enormous focus on the quantitative exploration of the particular research setting thus providing enhanced clarity about
the main dimensions of the topic area in a trustworthy manner. Moreover, the exploratory design also facilitates the requisite
flexibility which assists in exploring the latest important information about the core elements of the research. Thus, incorporation
of exploratory design in this particular research helped to examine the prevalent challenges Indian banks functioning in Delhi are
experiencing while preparing for the successful implementation of Basel III. Use of exploratory design also helped to gain insight
into the suitable measures taken by the banks for addressing the issues obstructing effective implementation of the defined norms
within Basel III.

18
3.2.1 Research Philosophy
The term philosophy relates to the development of knowledge and the nature of the knowledge. Research philosophy
contains important assumptions in which the world is viewed thereby setting the foundational base to carry the research in a
certain direction by enabling the investigator to determine the research approach, design and strategy as per the research problem.
There are three kinds of research philosophies devised for conducting a research study are pragmatism, positivism and
interpretivism. Positivism philosophy is one which embraces quantitative research methods and collects statistical information as
it works on the principle that a research phenomenon is constant and can be inquired in an independent way. On the contrary,
interpretivism philosophy considers that research phenomenon is not fixed instead it keeps on continually varying and it offers the
opportunity to use qualitative methods along with examining the reality or specific social phenomenon by evaluating multiple
perceptions concerning the research subject (Maxwell, 2012).

Pragmatism philosophy is the integration of interpretivism and positivism philosophy supporting the use of both
qualitative, as well as, quantitative methods which provides a proper understanding of the research problem by entailing
subjective and objective evaluation (Denscombe, 2012). In order to explore and analyse the issues and challenges associated with
the enforcement of Basel III regulations experienced by the Indian banks, it is vital to utilise quantitative and qualitative methods
for diving deeper into the area. Pragmatism philosophy enables collection of detailed data by facilitating the use of qualitative
methods and also permits assembling of quantitative data enhancing reliability dimension of the research. Therefore the
application of pragmatism philosophy is feasible for the study to illuminate problems faced by Indian banks concerning Basel III.
The incorporation of pragmatism philosophy can also help to determine issues related to the implementation of newer and
stringent capital and liquidity standards by emphasising on the statistical data as well, thus helping to develop a logical
conclusion.

3.2.2 Research Approach

The research approach is an imperative and essential constituent of a research playing a leading part in boosting the
validity and reliability of the entire project. Deductive approach and inductive approach are two variants which are selected by a
researcher as per the defined objectives and means of drawing pertinent data. The formulation of the research hypothesis is the
preliminary requirement of the deductive approach as it aims to verify the formed hypothesis with the help of gathered
information. In contrast to this, the inductive approach tends to introduce new theories in accordance with the data acquired via
the employment of different data collection tools. The inductive approach begins from a specific set of questions and objectives
and with subsequent flow of the research draws a generalised conclusion which can be applied in numerous dimensions (Bryman
and Bell, 2015). The deductive approach, on the contrary initially inspects and analyses general information related to the focused
area and with the gradual progression of the investigation process extracts specific findings on the basis of which developed
hypothesis is rejected or accepted (Flick, 2015).

The present research follows an inductive approach for completing the dissertation process as it helps to draw a
substantial amount of general information relating to the research domain instead of being limited to particular information. Thus,
the development of research on the basis of inductive approach helped to extract and assess varied forms of risks linked to the
adoption of modified capital and liquidity standards outlined in Basel III. Moreover, it also enabled to get an overview of the
capital and liquidity requirements mentioned in Basel I, Basel II and Basel 2.5 along with their implications on the banks before
proceeding to investigate challenges connected with Basel III, so as to gain comprehensive knowledge of the subject area.

3.2.3 Research Strategy

As per Saunders, a strategy is a plan of action to achieve a goal. A research strategy may therefore be defined as a plan of how a
researcher will go about answering his research question. It is a methodological link between the research philosophy and
subsequent choice of methods to collect and analyse data (Saunders, 2011). In this context, qualitative research strategy, mixed
19
method strategy and quantitative research strategy can be utilised by the researcher for acquiring the data related to research
objectives and analysing the gathered. It is apparent from topic of the research that issues and challenges encountered in the
implementation of Basel III regulations by the Indian banks require to be explored and evaluated in detail. Further, the research
objectives indicate the subjective, as well as objective assessment of the chosen phenomenon, therefore mixed method research

strategy is adopted for executing the work. It is mentioned that qualitative strategy is suitable for studies requiring inclusion
of human perceptions, opinions and viewpoints regarding the central phenomenon of study (Neuman, 2013).
On the contrary, quantitative strategy is appropriate for drawing statistics and numerical information in the
light of research aim and objectives. Moreover, it is stated that quantitative strategy facilitate in assessing
objective aspects of the chosen topic. Other than this, the mixed method strategy is beneficial for analysing
the research phenomenon in an objective, as well as subjective manner (Tashakkori and Teddlie, 2010).
Therefore, mixed method strategy has been implemented in this study in alignment with pragmatism
philosophy and exploratory design for determining key issues faced by the Indian banks in complying with
Basel III regulations.

Qualitative and statistical data can be gathered through primary data collection tools and secondary data collection in
which qualitative data can be obtained primary research instruments such as interview and focus group method and secondary
instruments such as library research and case study method. Apart form this, survey method is mainly utilised for quantitative

studies (Tashakkori and Teddlie, 2010). Hence, in this study, secondary quantitative data is obtained from reviewing
authentic and reliable secondary sources. Additionally, interview method and focus group method are also applied for gaining
deep insights concerning challenges and risk factors involved in the implementation of Basel-III regulations via the Indian banks
(Neuman, 2013). Interview method and focus group methods are suitable for meeting objectives of the present research and
recording participants' viewpoint regarding issues faced in adhering to Basel-III regulations and the steps undertaken by the Indian
banks to ensure full-compliance with enforced regulations. In order to gather specific information, four Indian banks namely, State
Bank of India, PNB, OBC and PSB.

The project under consideration lays special emphasis on the additional requirements and the preparedness of the Delhi branches
of the following banks, State Bank of India, PNB, OBC and PSB. The reaso

20
Designing literature review for my thesis project has helped me understand how to use my resources efficiently and optimally,
through which I could accomplish my thesis in the time frame provided. Before undertaking this Master level thesis work, I was
unaware of the real-time applications of research tools, different research tools, use of various research instruments and challenges
in collecting primary data for the research. With the help of this research study, I have been able to understand the whole research
process in a practical manner and include vital theoretical concepts concerning Basel III regulations, different types of risks occur
in the banking sector and issues faced mainly by the Indian banks in adhering to the compliance. However, any information is
related to the banking sector is highly confidential in nature; therefore I faced major complexities in gathering primary
information on the topic from the banking officials. I have found from data collection and review of the literature that crucial steps
are taken by the Indian banking sector for complying with Basel III regulations. During the course of work, I learned the
importance of structuring and completing each phase of the research such as introduction, review of the literature, assembling and
synthesising the data, research methodology, findings and analysis, conclusion and recommendations according to the decided
timeline.

I have understood the role of the baking sector in supporting the economic growth of the nation via undertaking this work, and it
has motivated me to undertake future career opportunities in the same sector. While preparing the research, I realised that my
interpretation skills and analytical skills are good; however, I require to work on my time management skills and communication
skills as I encountered with several issues in contacting Indian banking officials and obtaining their responses. I contacted around
30 banking personnel, out of which in the last phase, I have able to acquire from very few individuals. Additionally, I have
identified that in lengthy research, it is essential to perform every research activity in a timely manner to avoid delay and wastage
of resources. I also identified some weak areas in my academic skills and this research has been really helpful in improving my
academic knowledge and understand the need to manage different types of crisis in the banking operations.

I have selected four Indian banks to collect real-time data and examine the actual scenario surrounding the implementation of
capital regulations in India. I have ensured the participants that information provided by them will only be used for the academic

21
purpose and I will protect the obtained information appropriately. However, I could not find answers to questions regarding the
responsibility of credit rating agencies and whether the Basel III guidelines are promoting the "too big to fail" syndrome due to
which I could not address all the research objectives. Further, while reviewing the online news articles of credible newspaper
agencies in India and exploring secondary sources about Basel-III regulations, I found that government can issue recapitalisation
bonds against common equity infusion and reduce its shareholding in public sector banks.

As a whole, the learnings gained through this thesis work and while studying in Dublin Business School have contributed
towards my personal and professional development which will further shape my future career.

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