India cbank revises bank capital adequacy norms

MUMBAI May 30 (Reuters) - India's central bank on Friday revised the capital adequacy norms for investment by banks in their associates or subsidiaries and vice-versa, to adhere to Basel II norms.

The Reserve Bank of India defines associates as entities in which the parent bank has more than 30 percent but less than 50 percent stake.

Indian banks with overseas branches and foreign banks in India met Basel II requirements by March 2008, which aimed to match capital reserve requirements to the risks faced by banks, while other banks have time until March 2009. The regulator said investments by banks in equity and non-equity capital of their units would be deducted by 50 percent each from the Tier-I and Tier-II capital of the bank while assessing the capital adequacy level on a "solo" basis.

The RBI also said equity as well as non-equity investment made by a banking subsidiary in the capital of the parent bank would be deducted from the capital by 50 percent while assessing the capital adequacy level as a standalone entity.

(Reporting by Kaustav Roy; editing by Sunil Nair)