PSBs need R1.2 lakh cr capital: Moody’s

State Bank of India and 10 other public sector banks will need R1.2 lakh crore capital through 2020, far higher than what government has planned to inject into them, Moody’s Investors Service said on Friday, reports PTI. The Centre announced R70,000 crore capital infusion for 22 public sector banks by March 2019. Of this, R25,000 crore has already been injected and the government plans to infuse as much this fiscal.

STATE Bank of India and 10 other public sector banks (PSBs) will need R1.2 lakh crore of capital, far higher than the amount the government has planned to inject into them, to bolster their balance sheets, Moody’s Investors Service said on Friday.

The government has announced R70,000 crore capital infusion for 22 public sector banks by March 2019. Of this, R25,000 crore has already been injected and the government plans to infuse as much during the current fiscal.

Finance minister Arun Jaitley has said the government is willing to provide more funds to PSBs if required.

“In view of their results for the fiscal year ended March 2016 (FY2016), Moody's analysis suggests capital requirements of about R1.2 lakh crore for its 11 rated public sector banks, far higher than the remaining R45,000 crore included in the gover nment's budget for capital distribution to the banks until 2020,” the rating agency said.

After analysing the earnings of these banks for the financial year ended March 31, Moody's said the asset quality of the lenders will remain under pressure over the next 12 months and increased provisioning would constrain profitability and limit internal capital generation.

The asset quality review mandated by the Reserve Bank of India (RBI) in the second half of 2015-16, in an effort to clean up the banks' balance sheets, has adversely affected their profitability.

The review has resulted in higher non-performing loan (NPL) ratios and increased loan loss provisioning expenses. Eight of the 11 public sector banks (PSBs), rated by Moody's, posted a net loss for the full fiscal. The remaining three reported a significant decline in profits.

“We expect the capitalisation profile of the PSBs to further deteriorate, unless the government provides additional capital support,” the ratings agency said.

These banks' asset quality will remain under pressure over the next 12 months, as they continue to recognize NPLs from some of the larger leveraged corporate groups, particularly in the steel and power sectors.

“As a result, elevated provisioning expenses will continue to constrain profitability and limit inter nal capital generation,” Moody's said.

The total loss of R20,200 crore for 2015-16 more than offset the R19,200 capital injection received from the gover nment over the same period.

This result is in sharp contrast to the R29,100 crore profit reported by the 11 banks in 2014-15.

“As a result, elevated provisioning expenses will continue to constrain profitability and limit internal capital generation,” said Alka Anbarasu, a vice-president and senior analyst with Moody’s.

Moody’s said the asset quality of the lenders will remain under pressure over the next 12 months and increased provisioning would constrain profitability and limit internal capital generation