This refers to the report "Government banks in a capital logjam" (March 6). It is obvious that public sector banks (PSBs) cannot expand their business base unless they have the required amount of capital. Given the increased threat perceptions, weakening stability indicators and increasing uncertainty, there is expected to be continuing pressure on asset quality with a consequential effect on interest, profit and capital. Further, the tough Basel III norms will entail additional capital for banks, in terms of maintaining a minimum capital adequacy ratio of 11.5 per cent. It is estimated that PSBs will require additional capital close to Rs 5 lakh-crore to meet the Basel III norms, spread over five years until 2018. In the context of the alarming fiscal deficit, it is doubtful how the government, as the largest stakeholder in PSBs, will come to their rescue. Given the huge non-performing assets the PSBs are facing, market sentiment is also not appropriate for them to raise any capital.
Srinivasan Umashankar Nagpur
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