Capital allocation for lenders in budget is credit negative: Moody's

Tags: Banking
Government's allocation of Rs 11,200 crore for capital injection into state-run banks is credit negative as it is much smaller than estimated requirements, Moody's Investors Service said.

The rating agency, in a report dated Thursday, said it estimates lenders would need Rs 25,000-36,000 crore to meet a minimum Tier 1 ratio of 8% in the fiscal year ending March 2015.

"Indian public-sector banks' need for significant external capital is a result of an increase in non-performing loans (NPLs) owing to the country's slowing economy and infrastructure bottlenecks, and profitability that is insufficient for internal capital generation to fund loan growth," it said.

Last Monday, the government unveiled its interim budget for the fiscal year starting in April, allocating Rs 11,200 crore for capital injection into public-sector banks.

EDITORIAL OF THE DAY

  • It makes sense to highlight PM’s achievements with little noise to attract greater attention

    Are prime minister Narendra Modi and the BJP going over the top?

FC NEWSLETTER

Stay informed on our latest news!

TODAY'S COLUMNS

Arun Nigavekar

Can Hefa actually become a reality?

The ministry of human resource development (MHRD) is actively wo­rking ...

Kuruvilla Pandikattu

The India of our dreams

The speech “I have a dr­eam,” that Martin Luther King ...

Shona Adhikari

Head to Tate Modern for a refresher course on Bhupen Khakhar

India’s celebrated artist Bhupen Khakhar’s exhibition, titled You Can’t Please ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture