Moody’s Investors Service on Friday said that in order to strengthen balancesheets of public sector banks, Government will have to infuse Rs 1.2 lakh crore into the state-run banks by 2020.
Moody’s assessment of infusing money into PSU banks is way higher than an additional Rs 45,000 crore capital infusion plan envisaged by the Government.
It further said banks’ asset quality will remain under pressure over a period of one year and increased provisioning would constrain profitability and limit internal capital generation.
Considering the results of March 2016 fiscal in mind, Moody’s analysis indicates capital requirements of about Rs 1.2 trillion for its 11 rated public sector banks which is too much than the remaining Rs 450 billion included in the government’s budget for capital distribution to the banks until 2020.
According to reports, PSU banks had a nightmarish experience in the last fiscal as they posted losses of Rs 18,000 crore primarily due to higher provisioning for bad loans. The government is committed to providing capital over and above the budgeted Rs 25,000 crore for this fiscal.
Moody’s said most bank shares are trading below book value which constrains their ability to raise capital from the capital market.
