Financial Health of Public Sector Banks Should Increasingly Be Assessed By Ability To Access Capital Markets Says RBI

Going forward, the financial health of Public Sector Banks (PSBs) should increasingly be assessed by their ability to access capital markets rather than looking at the government as a recapitaliser of the first and last resort, the Reserve Bank of India (RBI), stated in a latest update. The government has been infusing capital in some PSBs, which has been just enough to meet the regulatory minimum including capital conservation buffer (CCB). The deferment of the implementation of the last tranche of the CCB till March 31, 2020 has offered some breathing space to these banks.

The PSBs capacity to sustain credit growth in consonance with the financing requirements of the economy will, however, warrant that capital is maintained well above the regulatory minimum, providing these banks confidence to assume risk and to lend. In this sense, recapitalisation would be a continuous process. On the other hand, raising resources through public issues or private placements has been constrained, partly due to volatile market conditions.