Indian
banks are stable but there will be challenges ahead for state-owned banks given
weak core capitalization and slow earnings recovery.
Capital-raising
will be a key theme for Indian banks, as asset-quality pressures gradually
stabilize and banks look to revive credit growth in support of a recovering GDP
outlook, however, there will be challenges for state-owned banks in particular,
given weak core capitalization and expectations of slow earnings recovery due
to high credit costs, said in report by rating agency, Fitch.
Public sector banks require Rs 2.40 lakh crore capital by 2018 to meet global Basel III norms.
State banks' large stressed asset stock should remain an overhang on banks' equity valuations for the foreseeable future, although the state's expected capital injection will provide a critical buffer for the near term The gross Non-Performing Assets (NPAs) of Public Sector Banks rose to 6.03 per cent at the end of June, as against 5.20 per cent in March this year.
Fitch believes that the banks will have to conduct much more capital raising to pursue sustainable growth rates while achieving Basel III requirements and cushioning balance-sheet stress at the same time.
The report also features questions on related Indian banking themes such as AT1 issuance, domestic systemically important banks, and the recently announced reform measures for state-owned banks, the rating agency said.
Public sector banks require Rs 2.40 lakh crore capital by 2018 to meet global Basel III norms.
State banks' large stressed asset stock should remain an overhang on banks' equity valuations for the foreseeable future, although the state's expected capital injection will provide a critical buffer for the near term The gross Non-Performing Assets (NPAs) of Public Sector Banks rose to 6.03 per cent at the end of June, as against 5.20 per cent in March this year.
Fitch believes that the banks will have to conduct much more capital raising to pursue sustainable growth rates while achieving Basel III requirements and cushioning balance-sheet stress at the same time.
The report also features questions on related Indian banking themes such as AT1 issuance, domestic systemically important banks, and the recently announced reform measures for state-owned banks, the rating agency said.
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