Conversation with Prof. RV on why three PSU banks merged? What are the pros and cons of this move?

Why the Banking crisis is a manufactured one, why merging of Small Banks is not good, the need for small banks etc. Growth in India happening inspite of Govt. not because of it.

What is Basel norm?

Banks lend to different types of borrowers and each carries its own risk. They lend the deposits of public
as well as money raised from the market – equity and debt. Cases of big banks collapsing due to their
inability to sustain the risk exposures are readily available. Therefore, Banks have to keep aside a certain
percentage of capital as security against the risk of non – recovery. Basel committee has produced
norms called Basel Norms for banking to tackle the risk.

Basel I:

In 1988, Basel Committee on Banking Supervision (BCBS) introduced capital measurement system called
Basel capital accord, also called Basel 1. It focused almost entirely on credit risk. It defined capital and
structure of risk weights for banks. The minimum capital requirement was fixed at 8% of risk-weighted
assets (RWA). RWA means assets with different risk profiles. For e.g.: An asset backed by collateral
would carry lesser risks as compared to personal loans, which have no collateral.
India adopted Basel 1 guidelines in 1999.

Basel II:

In 2004, Basel II guidelines were published by BCBS, which were considered to be the refined and
reformed versions of Basel I accord.
Indian banks started implementing Basel II in 2008
Basel III or Basel 3 released in December 2010 is the third in the series of Basel Accords. These guidelines
were introduced in response to the financial crisis of 2008. These accords deal with risk management
aspects for the banking sector. In a nutshell, we can say that Basel iii is the global regulatory standard
(agreed upon by the members of the Basel Committee on Banking Supervision) on bank capital
adequacy, stress testing, and market liquidity risk.
According to new Basel-III norms, this will kick in from March 2019

Everything You Need to Know About Basel Norms for Banking Exams


  1. **
    Professor Richar weiner explains..

    The above link also support why decentralisation of banking system is extremely necessary in U.K.(3 out of big 4 frims are from U.K also)
    Same centralisation is now done in India without logic 🙁

    SimiIarly the linked video also points the ill effect of centralisation, the excess power and paper based decision corrupts economy, they fail to lend on productive ideas but prefer lending on securities/speculation/ownership rights…which is why it is in their interest to increase price of such asset (eg: stock, currency, real estate, gold etc) ie. inflation, income gap, bubbles is like playing musical chair.. and the loser always is public.

    Even if govt intention is not evil, it is going to be really worse in future… my motive is that we become lesser and lesser dependent on foreign aids financially


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