Indian two thousand rupee banknotes are arranged for a photograph in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Capital Needs Of India’s Lenders Will Fall Next Year, Says Moody’s

India's capital-starved banks will be less so, come financial year 2019-20, as the lenders start making profits after several quarters of loss.

The banks have recognized most of their bad loans and provisioned for them as well, said Alka Anbarasu, vice president of financial institutions at Moody's Investor Service. "We expect the credit cost for banks will come down and profitability for these banks, though weak, will improve," she said. "Next year, only fewer banks will require capital support from the government."

The Indian government has set aside Rs 65,000 crore to be injected into public sector banks, many of which have a lower-than-permitted capital adequacy ratio.

This amount will be sufficient to shore up capital ratios, reducing the urgency for government support. The stress, however, will persist, Moody's said in a report. More capital will have to be pumped in if we are to witness growth, Anbarasu said.

Also read: India’s Banks Could See A Turnaround By FY20, Says S&P Global