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RBI issues draft norms to implement Basel III Capital Framework for AIFIs

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The draft directions propose minimum capital ratio of 11.5% of total risk weighted assets (RWA).
The RBI on Friday released a draft framework on master directions to implement the Basel III Capital Framework for All India Financial Institutions (AIFIs) including EXIM Bank, NABARD, NHB, and SIDBI.
The draft directions propose minimum capital ratio of 11.5% of total risk weighted assets (RWA). They also propose AIFIs to maintain a capital conservation buffer in the form of common equity at 2.5% of RWA, in addition to the minimum capital adequacy ratio of 9%. These Basel III norms are in line with the minimum capital ratio of 11.5% and minimum capital adequacy ratio of 9% followed by Indian banks.
All India Financial Institutions (AIFI)
AIFI is a group comprising of financial regulatory bodies and development finance institutions which play a significant role in financial markets. They are also known as financial instruments. They assist in proper allocation of resources, that are sourced from businesses which have a surplus. Financial institutions act as an intermediary between final lenders and borrowers in order to provide safety and liquidity.
Why RBI proposed new norms?
RBI proposed stricter capital norms because, as Indian economy is growing, AIFIs are being considered as a key institution for promoting the flow of direct or indirect credit to the economic sectors they serve to. Thus, Basel III Capital framework has been proposed to the AIFIs.