Indian banks are likely to require around $ 65 billion (close to Rs 4,16,000 crore) of additional capital to meet new Basel III capital standards that will be fully implemented by the financial year ending March 2019 (FY19), according to Fitch Ratings’ latest estimates.
“Weak capital positions have a major negative influence on Indian banks’ viability ratings, which will come under more pressure if the problem is not addressed,” it has warned. Capital needs have fallen from the previous estimate of $ 90 billion (around Rs 576,000 crore), largely as a result of asset rationalisation and weaker-than-expected loan growth, Fitch said. Even so, state banks — which account for 95 per cent of the estimated shortage — have limited options to raise the capital they require. “Prospects for internal capital generation are weak and low investor confidence impedes access to the equity capital market. Access to the Additional Tier 1 capital market has improved … reflecting state support to help state banks avoid missing coupon payments, but around two-thirds of the capital shortage is in the form of common equity Tier 1 (CET1),” it said.