PSB consolidation move in India is credit positive: Moody's

Capital Adequacy to remain weak despite M&A

Rating agency Moody's on Monday said the government’s decision to form a panel to consider and oversee mergers amongst public sector banks is credit positive as consolidation would provide scale efficiencies and improve corporate governance.

Last Wednesday, the Union Cabinet decided to form a ministerial panel led by Finance Minister Arun Jaitley to consider and oversee mergers among the country’s 21 public-sector banks.

However, such mergers would not improve the banks’ weak capitalisation due to lack of fresh capital infusions from the government, Moody’s said in a statement.

Most public banks have weak capital levels, so merging two or more entities will only