New Delhi, August 21
Public sector banks (PSBs) will need an external capital of up to Rs 2.1 lakh crore over the next two years and the most likely source to plug this shortfall will be government support, Moody's Investors Service said on Friday.
According to Moody's, the sharp slowdown in India's economic growth, exacerbated by the pandemic, would hurt the asset quality of PSBs and drive up credit costs.
"We expect to see PSBs' already weak capital buffers to be depleted, with Rs 1.9 trillion-Rs 2.1 trillion in external capital needed over the next two years to restore loss-absorbing buffers," Moody's vice-president and senior credit officer Alka Anbarasu said.
PSBs dominate India's banking system. Any failure could jeopardise financial stability. "As such, we expect government support will remain forthcoming," Anbarasu said.
Moody's said asset quality would deteriorate, led by retail and small business loans, and economy would contract sharply in fiscal year ending March 2021 before returning to growth in the 2021 fiscal. — PTI
from The Tribune https://ift.tt/3hlaIh9
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