Fund Infusion into Public Sector Banks (PSBs) via recapitalisation bonds - Angel Broking

Mr. Jaikishan Parmar - Sr. Equity Research Analyst, Angel Broking Ltd

"Pandemic has impacted Banking and financial companies directly. Due to lock down many companies' cash flow has impacted negatively, economic activity has slowed down, the unemployment rate has gone up. These all factors will impact the loan paying ability of the company and individual, which we believe impact asset quality of banks and NBFC.

The RBI said the gross non-performing assets (GNPA) ratio of the country's scheduled commercial banks (SCBs) may increase to 12.5 percent by the same period next year from 8.5 percent in March, under the baseline scenario. Many private banks and NBFC have already raised capital or in the process of augmenting capital despite there, CAR was not near regulatory requirement. The primary reason for capital raising is to build adequate capital if slippages higher from the moratorium book. However, some of the PSU bank's CAR ratio is near regulatory requirement, hence, either the government needs to infuse capital or they have to sell stake in some of the subsidiaries. Today the Finance Ministry has sought Parliamentary approval to infuse Rs 20,000 crore into public sector banks (PSBs) via recapitalisation bonds."

Source : Equity Bulls

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