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Indian banks need $65 bn to meet Basel rules by 2019, says Fitch

By Reuters

  • 12 Sep 2017
Indian banks need $65 bn to meet Basel rules by 2019, says Fitch
Credit: Reuters

Indian banks will need additional capital of $65 billion to meet all of global Basel III banking rules by March 2019, with state-run lenders accounting for 95 percent of the requirements, Fitch Ratings said on Tuesday.

That is far above the $11 billion in capital infusions into state-run lenders the government has budgeted through March 2019, with $3 billion due to be injected in the 2017/18 and 2018/19 fiscal years.

Fitch’s latest estimate is lower than its previous call of $90 billion as weaker-than-expected loan growth reduced capital requirements, but the credit rating agency continued to warn that Indian lenders “have limited options to raise the capital they still require”.

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Stressed loans in Indian banks hit a record $150 billion at the end of December, with state-run lenders accounting for the bulk of it.

“State banks are unlikely to be freed from their current gridlock unless NPL (non-performing loan) resolution is accompanied by additional capital,” Fitch said in its statement.

It added the capital requirements at Indian state-run lenders remained hefty due to several factors, including low common equity ratios and provisioning requirements for new loans.

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