One of the most significant impact of Basel II amendments is the material change in the calcualtino of Tier I capital along with defining what is invluded in tier I capital. In addition to the above, several other changes have been made into basel II, to implment what people call the Basel III. If we were to ahve many more of the 2008 crisis, you can imagine Basel X, the number of banks that would still be in business and the role of Risk Management in the world. Anyway, below are some of the reasons why Banks might be running around for more capital. 1. Banks are expected to raise significant amount of equity or eligible capital once Basel III kicks in. Given that Indian Banks were better managed than there counterparts in US/UK (that had over 50Xleverage), it would be little concern, but still a worry to raise capital cheap. 2.One of the things happening is that with the new banks coming into the scene in India, with RBI granting new licenses, this should pump additional capital into the system. So, whatever lending was with 20-30 banks would spread to 40-50 banks and the CRAR would be better at same capital base. Ie instead of raising capital, banks would reduce lending, which would happen naturally as competition increases. 3. Liquidity ratios and the recent changes makes significant impact on Banking business. Besides the regulatory CRAR requirements, banks would typically want to hold sufficient cushion to withstand shocks and so although the calculations you made for additional capital due to Tier I definition changes, the requirement for capital would be significantly more as Banks was to keep extra. This will create further squeeze to capital markets. 4. With so much additional capital maintained and host of other changes, experts are predicting ROE to fall drastically to sub 10%. So, banking is no longer a great business if not managed well. 5. Increasing NPA in PSU banks means higher capital requirements, hence more capital from markets. 6. General growth in Banking business to fund mega infra / govt projects means more capital. Banks need to fund the 67,000 crore 3G auction. To conclude, capital raising for Banking sector is inevitable.