Domestic banks will need a whopping $90 billion capital to meet the Basel-III norms which will be fully implemented by the March 2016, rating agency Fitch said on Tuesday.
Public sector banks will needs 80 per cent of the estimated capital, Fitch said.
“The capital needs have come down due to weak loan growth, but they are onerous for the banks, given weak asset quality and internal capital generation,” it said in a statement. Out of the total capital requirement, more than 50 per cent has to be met via core equity and the rest largely via Additional Tier-1 (AT1) debt capital instruments.
“The sharp rise in their NPLs and resultant losses has weakened the banks’ core capital buffers, which will be further stretched when adjusted for a higher 70 per cent provision cover on problem loans,” Fitch said.
Public sector banks have seen sharp rise in bad loans in the second half of 2015-16 and many of them reported heavy losses.
Fitch said the viability ratings of these banks will be under more pressure if capital levels are not addressed, either by the government or the market.
