New banks needed as govt can't fund PSU bank equity

In October 2011, Moody’s downgraded SBI because its Tier I capital adequacy ratio dropped below 8%. Although the government has since made this up by infusing some R8,000 crore into the country’s largest lender, the downgrade showed just how vulnerable PSU banks are. So unless the government is able to give PSU banks the capital they need, or lower its equity share in them, it’s a near certainty India Inc, especially the smaller firms, is going to see a big gap in its capital requirements since PSU banks account for the lion’s share of loans today.

Read Full Story>>