BASEL IV IMPLICATION IN INDIA

AUTHOR – ANSHUMAN KAR, STUDENT AT KIIT SCHOOL OF LAW

BEST CITATION – ANSHUMAN KAR, BASEL IV IMPLICATION IN INDIA, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 6 (4) OF 2026, PG. 1024-1030, APIS – 3920 – 0001 & ISSN – 2583-2344. DOI – https://doi.org/10.65393/IJLRV6I495

Abstract

The Basel IV framework, a casual industry nomenclature to the 2017 full implementation of the Basel III reforms, is the biggest change in the global banking regulation since the 2008 financial crisis. Although, the main aim of Basel Committee on Banking Supervision (BCBS) was to decrease the excessive volatility in Risk-Weighted Assets (RWA) and make the capital ratings of banks credible again, the introduction of these finalized standards have experienced special structural and legal opposition in the Indian context. The current research article explores the complex factors that led to the gradual, and in many cases, slow implementation of Basel IV standards in India. This research paper assesses the conflict between international regulatory convergence and national economic priorities by conducting a qualitative analysis of the Banking regulation Act, 1949, and the Reserve bank of India Act, 1934. This paper states that the so-called Output Floor, the highlight of Basel IV that restricts the capital-saving qualities of internal risk models, presents a unique threat to Indian Public Sector Banks (PSBs). The institutions, which already have been out of a 10-year span of Non-Performing Assets (NPAs) and aggressive recapitalization, have received a capital tax that might unwillingly suffocate the flow of credit to important sectors like Infrastructure and Micro, Small, and Medium Enterprises (MSMEs). Moreover, the study emphasizes the role of the Reserve Bank of India (RBI), which is not only a passive recipient of international norms, but also a proactive, so-called, macro-prudential architect. The RBI has chosen to implement in a gradual implementation roadmap by using its statutory powers under Section 21 and Section 35A of the Banking Regulation Act, emphasising on a concept of Regulatory Smoothing, rather than direct compliance. It is concluded in this paper that though India is adamant about Basel framework to retain its world credit rating, the non-implementation so far was an orchestrated defensive move aimed at saving the domestic credit cycle of the pro-cyclicality of standardized international risk weights. The results imply that in the case of an emerging economy such as India, the Basel IV is a fine balancing act between the goal of attaining global “Gold Standard” and the goal of making capital requirements a stumbling block to sovereign economic development.