India reassures public sector banks of capital support

India reassures public sector banks of capital support7th April 2020: Moody’s and Fitch group’s India Ratings and Research have assigned a negative outlook for the Indian banking sector due to disruptions arising from the coronavirus outbreak.

The government has assured state banks it is ready to provide capital support as the coronavirus pandemic may lead to a surge in bad loans when economic growth is slowing. Indian banks are burdened with a bad loan pile of nearly $140 billion and the lion’s share of it rests with the state-owned banks. Meanwhile, loan growth for the banking industry has also plummeted to the low single digits putting a further strain on these lenders.

On top of the list right now are the mergers and to ensure how one can tackle the COVID-19 related problems. Currently, most banks are in a position to meet their capital requirement for the first half of this financial year. The government has already pumped in ₹3.5 trillion in the last five years to rescue the beleaguered banks. In this financial year’s budget announcement in February, it had not allocated any funds for capital infusion. Instead, the banks had been encouraged to tap capital markets for funds.

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