Moody's: India's banks need over double the capital requirements

Moody's Investors Service warns that India's state-run banks will actually need over double the capital the government plans to inject into them due to their weak asset quality and levels of profitability. It says the banks will require around INR 1.2tn ($18bn) in capital through to 2020; the government plans to inject INR 450bn ($6.7bn) into state banks over the three financial years to March 2019. India's lenders have seen their bad loans and provisions to cover loan defaults in the six months to March rocket. Furthermore, Moody's Alka Anbarasu warns that "elevated provisioning expenses will continue to constrain profitability and limit internal capital generation."

Moody's says India state banks need double the capital planned by govt

MUMBAI, June 10 (Reuters) - India's top state-run banks will need more than double the capital the government plans to inject into them due to their weak asset quality and levels of profitability, Moody's Investors Service said on Friday.

Eleven lenders that Moody's rates, including State Bank of India, Bank of Baroda and Bank of India , will need about 1.2 trillion rupees ($18 billion) in capital through 2020, the ratings agency said, after analysing their results for the fiscal year to March.

That compares with government plans to inject 450 billion rupees into state banks over the three financial years to March 2019. For the current financial year, the government has budgeted for 250 billion rupees in bank capital infusion.

"Elevated provisioning expenses will continue to constrain profitability and limit internal capital generation," Alka Anbarasu, a senior analyst at Moody's, said in a statement.

Indian banks have seen a surge in their bad loans and provisions to cover loan defaults in the six months to March after an asset quality review ordered by their regulator, the Reserve Bank of India.