(FE)
Government’s latest capital infusion of Rs 48,239 crore in PSU banks announced on 21 February 2019 may not be sufficient to support significantly stronger lending growth, said Fitch Ratings in a report. Since a large proportion of the government’s latest round of recapitalisation would go towards meeting the regulatory shortfalls, there is a need for more infusion of funds as a cushion against future losses. “Overall, we estimate that banks will need an additional Rs 1.64 lakh crore in 2019, after these latest injections, to sufficiently meet minimum Basel III capital standards, achieve 65 per cent NPL cover, and leave surplus capital for growth,’’ said Fitch Ratings in the report.
The authorities’ approach to the banking sector has been shifted towards spurring lending in recent months, said Fitch Ratings. The Reserve Bank of India (RBI) has resorted to a three step strategy to tackle the challenges. In January, it deferred the implementation of the final tranche of the capital conservation buffer (CCB) of 0.625 per cent to end-March 2020.
