The government’s announcement of an upfront capital infusion of Rs 70,000 crore in public sector banks will enable them to grow loans by around 13-15 per cent in the fiscal year ending March 2020 and will also allow them to meet the final Basel III capital requirements, rating agency Moody’s said on Monday.
“The announcement by the Indian government that it will frontload its planned Rs 70,000 crore capital infusion into the public sector banks will improve the bank’s capitalisation and help them calibrate their balance sheet growth. We estimate that the fresh capital will enable public sector banks to grow loans by around 13 per cent – 15 per cent in the fiscal year ending March 2020 (fiscal 2020), compared with about 10 per cent in fiscal 2019, while also allowing them to meet the final Basel III capital requirements (regulatory minimums plus the capital conservation buffer). The capital infusion is part of India’s government budget for fiscal 2020,” said Alka Anbarasu, Vice President, Financial Institutions Group, Moody’s Investors Service.
Announcing the capital infusion on Friday, the government also rolled back recent tax hikes on foreign and domestic equity investors in an attempt to boost market sentiment and revive the slowing economy.