"Those banks which have maintained regulatory capital of at least 9 per cent of the risk weighted assets for both credit as well as market risks, would be permitted to treat the entire balance in the investment fluctuation reserve as Tier I capital," RBI said in its busy season credit policy.
The central bank said once the amount of IFR is transferred towards Tier I capital, a headroom for raising an equal amount of Tier II capital would be available for eligible banks, up to half of which could be raised through subordinate debt.
Globally, banks raise capital through equity shares and subordinated debt and preference shares, which are eligible for inclusion in Tier I or Tier II or Tier III capital.
But, at present banks in India do not have such options available except for raising Tier II capital through subordinated debt to some extent.
RBI is examining various types of capital instruments that could be permitted under the New Capital Adequacy Framework as banks are scheduled to adopt the stringent Base II norms that prescribes for provisioning for operational and market risks.
In other prudential measures for banks, RBI said it could allow good banks to increase their market capital exposure while proposing to increase the provisioning requirement for standard advances.
"Banks having sound internal controls and robust risk management systems can approach the RBI for higher limits (in capital market exposure)," it said.
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