Of the Rs2.11 trillion bank recapitalisation plan, Rs1.35 trillion would be in the form of recapitalisation bonds, while the rest would involve a combination of already announced budgetary support and fundraising by the banks from the capital markets. Photo: MintNew Delhi: Moody’s Investors Service on Wednesday said the government’s Rs2.11 trillion PSU bank recapitalisation plan is “significant credit positive” as it will help address the problem of weak capitalisation. “The quantum of the plan is large enough to comprehensively address these banks’ weak capitalisation levels and is a significant credit positive as weak capitalisation is the main credit weakness for most rated public sector banks,” said Srikanth Vadlamani, a Moody’s vice president and senior credit officer. In the past, the government had used the recapitalisation bond route to recapitalise public sector banks. “However, given that the overarching credit weakness of PSU banks currently is their weak capitalisation levels, we would see infusion of the recapitalisation bonds as a significant credit positive, notwithstanding some of these potential weaknesses in their structure,” Moody’s said.

Source: Mint October 25, 2017 09:56 UTC