InvestorQ : Will Indian banks be in a position to raise capital from the market and from the government during the year?
sara Kunju made post

Will Indian banks be in a position to raise capital from the market and from the government during the year?

Answer
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5 months ago


That is the million dollar question and it does look quite difficult. Capital access appears to be the one big challenge for the Indian banks; both PSUs and private banks. Moody’s is of the view that the comfort zone could now change drastically as most private banks could come under profit pressure due to rising incidence of asset impairment. In the past, private banks had easy access to funds but that could rapidly change with stressed financials. Post COVID-19, Moody’s anticipates that even private banks could see cost of funding going up sharply. Higher credit costs and lower revenues will clearly squeeze profits. There is also the issue of government support to banks. To avoid systemic risks, the government has consistently intervened and bailed out PSU banks. With fiscal deficit set to go higher, additional capital infusion will be limited and FM has already indicated that. Cases like Yes Bank will find it hard to get a willing buyer to bail them out. Loss of government support remains a major risk for Indian banks. In future, depositor bailouts may be partial and calibrated. This remains another major risk for Indian banks.