Public-sector Indian banks will require up to US$37 billion in external capital to comply with the Basel III norms, according to credit rating agency Moody’s.
More specifically, Moody’s said Indian public-sector banks will need to raise INR1.5 to INR2.2 trillion, or US$26 to US$37 billion between FY 2015 and the full implementation of Basel III in FY 2019.
Go deeper with GlobalData
The estimate is based on assumptions that there would be a moderate recovery in the economy and a gradual decline in the non-performing loans from the current levels.
Indian public sector banks barely meet current minimum capital requirements, and we anticipate that they will find it difficult to raise capital quickly in the current environment," said Gene Fang, a Moody’s vice president.
Basel III raises the minimum required capital levels for both total Tier 1 to 7.0% and Common Equity Tier 1 (CET1) capital to 5.5%, and banks will also need to meet a Capital Conservation Buffer in order to pay dividends, says Moody’s.
Moody’s noted that a significant part of the required capital — around INR800bn to INR900bn could be in the form of Additional Tier 1 (AT1) capital.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataMoody’s said banks may tap the equity markets to raise capital, but with still-low bank valuations, they could struggle to raise the required amount.
Moody’s rates 11 public sector banks, representing 62% of net loans in the Indian banking system.
