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PSU banks need more capital; Fitch

Rating agency Fitch Ratings on Friday said that the standalone credit profiles of many Indian public sector banks should come under pressure unless there is meaningful action to restore capital adequa

Rating agency Fitch Ratings on Friday said that the standalone credit profiles of many Indian public sector banks should come under pressure unless there is meaningful action to restore capital adequacy. According to the rating agency, the earlier estimated capital requirement of $140 billion needs to be reassessed, given some of the losses.

Significant quarterly losses reported at several large public banks last week, including Bank of Baroda and Bank of India, underscored long-standing balancesheet and capital risks stemming from legacy issues pertaining to poor asset quality and weak provisioning.

Notably, the impact on private-sector banks was relatively limited, with public-sector banks having to provide nearly eight times more for non-performing loans (NPLs).

This resulted in a cumulative loss of almost RS 10,800 crore ($1.6 billion) in Q3FY16, which is nearly 43 per cent of the rS 25,000 crore capital injection planned by government for financial year 2016.

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