With ailing public sector banks (PSBs) finding it tough to raise capital from the market, the government may have to raise equity infusion by almost four-five times over two years, Moody’s Investors Service has said. Thus, the Centre may have to chip in with up to Rs 95,000 crore in FY18 and FY19, up from its initial commitment of Rs 20,000 crore, the rating agency said on Thursday.
PSBs require external capital of about Rs 70,000-95,000 crore to meet the Basel-III capital adequacy norms by March 2019. Though the PSBs have announced plans to raise external capital (equity and additional tier-1 capital), yet the government seemed to be the only viable source of external equity capital for them.
Lower market valuations was the biggest hindrance if PSBs chose to raise fresh equity from the markets. The only reason these banks have been given a positive rating was because of the positive outlook of the central government, Alka Anbarasu, senior analyst at Moody’s, said. “Unless the banks are able to demonstrate profitable performance in the next few quarters, they won’t be able to go out and raise capital.”
via PSBs need four times more capital than govt allocation: Moody’s | Business Standard News
aniltikotekar4sme.com 