India’s stressed banks need higher Govt allocation: Moody’s
Rating agency says Indian government may have allocate up to US$ 14.79 billion in FY18 and FY19 to reduce the stress faced by state-owned banks
Rating agency Moody’s has painted a grim picture of the future of the ailing Indian Public Sector Banks (PSBs) and said the central government needs to infuse more funds to make them healthy enough to conform to Base III capital adequacy norms, which kick in from March 2019, reports PTI.
A report by Moody’s Investors Service has stated that stressed assets of Indian banks will increase through 2019 and capitalization will remain a key credit weakness for state-owned lenders. The Indian government may have to chip in with up to Rs 95,000 crore (US$ 14.79 billion) in FY18 and FY19, up from its initial commitment of Rs 20,000 crore (US$ 3.1 billion).
PSBs have limited ability to raise external capital and hence infusion by the government remains the only viable source for shoring up capital base, the report said.
Under the Indradhanush plan for bank recapitalization, the Indian government was to infuse Rs 70,000 crore (US$ 10.8 billion) in PSBs, beginning from 2015. Of this, the government has already infused Rs 50,000 crore (US$ 7.7 billion) in the past two fiscal years and the remaining will be pumped in by the end of FY19.