N S Vishwanathan : Basel III implementation – challenges for Indian banking system

2. Basel III framework was basically the response of the global banking regulators to deal with the factors, more specifically those relating to the banking system that led to the global economic crisis or the great recession. In the advanced economies, there was a huge fiscal cost for protecting the financial system, which those governments did not want a repeat of. The framework therefore sought to increase the capital and improve the quality thereof to enhance the loss absorption capacity and resilience of the banks, brought in a leverage ratio to contain balance sheet expansion in relation to capital, introduced measures to ensure sound liquidity risk management framework in the form of liquidity coverage ratio (LCR) and net stable funding ratio (NSFR), modified provisioning norms and of course enhanced disclosure requirements.