The deadline pertaining to the implementation of Basel II norms is drawing nearer by the day. For effective implementation, there are a lot of contentious issues need to be solved. The preparedness varies from bank to bank as also the consensus on the approach to be taken. The central bank's stand of the issue too seems to be dubious. The article discusses indepth the three pillars of the framework.

Basel II regulations are going to become a reality in the Indian banking industry by March 2006. The speculation whether it is going to be implemented or not, has ended, with the RBI stating so.

The implementation is not going to be an easy one given the large number of public sector and private sector banks in existence. Under the new norms, all assets would be given a separate risk weight according to it's risk. Assets belonging to a particular class would no longer be given the same risk weight. These would increase the capital requirement to a large extent. Apart from these, majority of the banks lack an adequate data capture mechanism. This alone would cause a lot of difficulty in terms of risk management as per Basel II norms.