Public sector banks are required to raise up to $37 billion over the next four to five years to meet Basel III compliance norms, says Moody’s. This is based on the assumption that there could be a moderate recovery in the economy and a better performance on the NPA front. Says Moody’s in its report ‘Indian banks could need $26-37 billion in external capital for Basel III compliance’: “Our rated public sector banks in the country will need to raise Rs.1.5-2.2 trillion ($26-37 billion) between FY15 and the full implementation of Basel III in FY19. A major portion of the required capital – as much as Rs.80,000-Rs90,000 crore- could be in the form of additional tier I capital. “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,” Moody’s vice-president Gene Fang said. According to the rating agency, low capital levels remain a key credit weakness for the public-sector banks.Weak asset quality has depressed profitability and internal capital generation, leaving public-sector banks reliant on periodic capital injections from the government, says Fang.
