'Capital needs of Indian public sector banks much higher'

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SME Times News Bureau | 22 Jul, 2016
The additional capital infusion of Rs 22,915 crore into 13 weak banks announced recently by the central government is positive for them but the actual capital needs were much more higher, said global credit rating agency Moody's Investors Service.

In its sectoral comment on Indian public sector banks on Friday, Moody's said as per its analysis an external capital requirement of about Rs 1.2 trillion for the rated 11 government owned banks as of the beginning of this fiscal far exceeds the remaining Rs 450 billion the government budgeted for disbursal to the banks by March 2019.

"Therefore, unless the government increases the planned amount of capital for infusion, the capital needs of public sector banks remain significantly above the amount budgeted by the government," Moody's said.

In August 2015, the government announced that Rs 700 billion will be allocated to public sector banks over a four-year period to help improve their capitalisation, Moody's said.

Of this amount, the government has already allocated about Rs 250 billion in the fiscal year 2015.

For fiscal 2016, the government has budgeted another Rs 250 billion (from which the Rs 229 billion was disbursed) and consequently, the remaining amount of Rs 21 billion will be allocated to the banks at a later date, Moody's said.