Basel Norms

Why it matters

• They establish the structural framework for the Reserve Bank of India's prudential regulations regarding capital adequacy and liquidity management.
• Compliance with these norms directly affects the credit creation capacity of Indian commercial banks and shapes public sector bank recapitalisation strategies.
• They serve as a benchmark for assessing the resilience of the Indian financial system against domestic and global macroeconomic shocks.

How it is asked

UPSC typically frames questions around the tension between adhering to strict Basel III capital standards and maintaining credit flow to support domestic economic growth. Candidates are expected to analyze how these norms influence the resolution of non-performing assets and the regulatory framework enforced by the Reserve Bank of India.