Indian private and public sectors banks may have to raise an additional $20 billion – $7 billion and $13 billion respectively, to provision for weaker credit quality over the next 12 months, as per Credit Suisse. Credit Suisse also raised credit cost estimates by 20-60 percent “given lockdown extensions and unimpressive fiscal stimulus,” Equity Research Head Ashish Gupta said. “Private Banks’ tier-1 is healthy at 13 percent, and coupled with strong pre-provisioning profitability, adequate to absorb up to 4 percent additional credit costs (i.e. provisioning requirements). We, however, expect them to shore up capital buffers and estimate $20 billion in capital-raising by Indian banks in the next 12 months,” Gupta stated. As per the report, an estimated $2.5 trillion debt – a big two thirds from non-banking finance companies (NBFCs) is already downgraded to levels that would make refinance difficult. India’s economy is expected to crunch by 5 percent in FY21 and banks’ moves seem to be in line – Kotak Mahindra Bank on May 26 launched its Rs 7,000 crore qualified institutional placement (QIP), while RBL Bank and IDFC First Bank also recently raised fresh funds.

(Moneycontrol)