Mumbai, Oct 22 (PTI) The Reserve Bank on Friday came out with a comprehensive draft framework for implementing the Basel III capital adequacy norms for All India Financial Institutions (AIFIs), including Exim Bank, NABARD, National Housing Bank and SIDBI.

The draft Master Direction, issued by the RBI, seeks to consolidate the existing guidelines on exposure norms, classification, valuation and operation of investment portfolio and resource raising norms issued to the AIFIs.

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The draft, on which the RBI has invited comments from stakeholders by November 30, has prescribed the limits for investments by AIFIs in subsidiaries, financial services companies and non-financial services companies.

These standards, the RBI said, "mainly seek to raise the quality and level of capital to ensure that financial entities are better able to absorb losses on both a going concern and a gone concern basis, increase the risk coverage of the capital framework, introduce leverage ratio to serve as a backstop to the risk-based capital measure, raise the standards for the supervisory review process and public disclosures etc."

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The proposed directions, if finalised, would be applicable to the AIFIs regulated by Reserve Bank of India (RBI) -- Exim Bank, NABARD, NHB and SIDBI.

The Reserve Bank has decided to implement the Basel III capital framework for the AIFIs. The draft is in line with the central bank's plans.

While being essentially risk-based, the prudential regulation for various types of financial sector entities across the world tends to be broadly similar.

Internationally, many development finance institutions have chosen to adopt Basel III regulations because the micro-prudential elements of Basel standards generally measure and capitalise financial risks regardless of the entities that undertake them.

Basel III strengthens the institution-level (micro prudential regulation), with the intention to raise the resilience of individual financial institutions in periods of stress.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)