In­crease cap­i­tal infusion in PSU banks: Moody's

The Pak Banker - - FRONT PAGE -

The In­dian govern­ment should in­crease its pro­posed cap­i­tal infusion in pub­lic sec­tor banks be­cause of a surge in bad loans af­ter Re­serve Bank of In­dia (RBI) de­cided to clean up banks' bal­ance sheets, ac­cord­ing to Moody's In­vestors Ser­vice.

The credit pro­file of pub­lic sec­tor banks will worsen if the govern­ment does not in­crease cap­i­tal al­lo­ca­tion in pub­lic sec­tor banks in the up­com­ing bud­get, which will be pre­sented on 29 Fe­bru­ary, Moody's said.

In 2015, the govern­ment had pro­posed Rs.70,000 crore cap­i­tal infusion over four years, start­ing with Rs.25,000 crore in the cur­rent fi­nan­cial year (201516) and an­other Rs.25,000 crore in the next fi­nan­cial year. "While the re­ported NPLs (non­per­form­ing loans) of the 11 pub­lic sec­tor banks that we rate reg­is­tered a sig­nif­i­cant 0.9%-4.1% in­crease in the most re­cent quar­ter ended 31 De­cem­ber 2015, Moody's view of the true un­der­ly­ing as­set qual­ity of th­ese banks has re­main un­changed," Srikanth Vad­la­mani, Vice Pres­i­dent and Se­nior Credit Of­fi­cer of Moody's said.

Moody's es­ti­mates that the 11 pub­lic sec­tor banks' ex­ter­nal cap­i­tal re­quire­ments will be Rs.1.45 lakh crore for the four fis­cal years, from March 31, 2016 to March 31, 2019.

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