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Indian Banks’ Ratings Under Pressure Due to Bad loans, Says Fitch Report

In its latest report on bank recapitalisation, Fitch said that the government will have to infuse more than double the capital it is doing so at present into state-run banks if it is to raise credit growth and clean up Non Performing Liabilities.

Shereen Bhan | CNBC TV18

Updated:September 12, 2017, 5:37 PM IST
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Indian Banks’ Ratings Under Pressure Due to Bad loans, Says Fitch Report
Logo of Fitch Ratings on its building. Representative image. (Image: Reuters)
New Delhi: Fitch Ratings has said that Indian banks' viability ratings will come under pressure if their capital problem is not addressed.

In its latest report on bank recapitalisation, the global ratings agency said that the government will have to infuse more than double the capital it is doing so at present into state-run banks if it is to raise credit growth and clean up Non-Performing Liabilities.

This comes just a week after RBI Deputy Governor Viral Acharya made a fervent pitch for decisive and adequate bank recapitalisation to address the bad loans problem.

Fitch Ratings had earlier estimated a $ 90 billion capital requirement for Indian banks. The ratings agency also estimated that Indian banks will need $65 billion to meet Basel-III capital norms by March 2019.

After March 2019, Indian banks will need to maintain a minimum Capital Adequacy Ratio (CAR) of nine percent, over and above their capital conservation buffer which is 2.5 percent. This translates into a CAR of 11.5 percent, which is higher than the 9.62 percent they are currently required to maintain.

The report also said that stressed assets in the system have risen to 12% as of Financial Year 2017.
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