A Study of Capital Adequacy Requirements of SSI Regarding Commercial Banks in India

Author: Raavi Jain

Abstract:
Banking system occupies an important role in the economy of a nation. In fact, banking system of any country is the lifeblood of an economy. A banking institution is indispensable in the modern society. It plays a pivotal role in the economic development of a country and forms the core of the money market for the country. The Capital Adequacy framework of the Basel Committee on Banking Supervision (BCBS) which was adopted by the G 10 countries in 1990 and by the rest of the world thereafter, has been the single most successful attempt in the move towards convergence of international standards in banking, enabling cross-country assessments and comparisons of internationally active banks. Every industry needs capital to run the business activities. Particularly in SSI, the enterprise is going to collapse without adequate supply of capital. With the introduction of economic liberalization, privatization and globalization the whole scene of Indian financial market has changed. Similarly, the role of banking sector has changed dramatically. The banking sector performs three primary functions in an economy; first, the operation of the payment system, second, the mobilization of savings and finally, the allocation of savings to investment projects. The banking system which constitutes the core of the financial sector plays a critical role in transmitting monetary policy impulses to the entire economic system. An efficient banking structure can promote greater amount of investment which can further help to achieve a faster growth rate of economy. Worldwide experience confirms that countries with well developed and market oriented free banking system grow faster and more consistently.

Keywords:Banking system, Capital Adequacy Framework, Basel Committee on Banking Supervision, SSI, Economic System.

DOI:

International Journal of Trade & Commerce (Vol: 6 Issue:2)