Rating company Moody's has said that capital requirement for government owned Indian banks may rise to 8% to $37 billion as the economic recovery could raise the demand for loans. It would be difficult for banks to raise the needed capital if the economic reforms do not lead to lower government's holdings in banks.
Assuming a moderate recovery in economic growth and a gradual decline in new non-performing loans (NPLs), Moody's has estimated that rated public-sector banks in India will need to raise Rs 1.5 - Rs2.2 trillion ($26 - $37 billion) in Tier 1 capital externally between FY'15 and full implementation of Basel III in FY' 19. The estimate is equivalent to 42%-61% of public-sector banks' aggregate market cap (as of 12 September 2014), the ratings firm has norm. Basel II are the new capital norms prescribed for banks globally by the Bank of International Settlements head quartered in Basel, Switerland.
Assuming a moderate recovery in economic growth and a gradual decline in new non-performing loans (NPLs), Moody's has estimated that rated public-sector banks in India will need to raise Rs 1.5 - Rs2.2 trillion ($26 - $37 billion) in Tier 1 capital externally between FY'15 and full implementation of Basel III in FY' 19. The estimate is equivalent to 42%-61% of public-sector banks' aggregate market cap (as of 12 September 2014), the ratings firm has norm. Basel II are the new capital norms prescribed for banks globally by the Bank of International Settlements head quartered in Basel, Switerland.
