The Finance Ministry has asked state-run banks to report their immediate capital fund requirements, if any, following Moody's downgrade of country's largest lender State Bank of India (SBI).
"We have asked the banks if they are feeling any immediate stress on funds so that corrective measures, if required, could be taken at the earliest," an official in the ministry said today.
The government proposes to provide a sum of Rs 6,000 crore to enable public sector banks to maintain a minimum Tier I Capital to Risk Weighted Asset Ratio (CRAR) at 8% this fiscal. Last year, the capital infusion budget was Rs 20,157 crore.
Earlier this week, Moody's downgraded SBI's financial strength rating by one notch to 'D+' due to low tier-I capital ratio and worsening asset quality. The downgrading is likely to make overseas borrowings costlier for the state-owned lender.
At the end of June quarter, SBI reported a tier-I capital ratio of 7.60%, against the suggested level of 8% termed as desirable by the government for public sector banks.
While the Reserve Bank as a regulator carries out internal ratings of all PSU banks, rating agencies like Standard & Poor's, Moody's and Fitch too rate them on various parameters, such as capital adequacy and non-performing assets.
"We already have both the internal and external ratings of all the banks. We do not need to panic because of any sudden downgrade," the official said.
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There are 26 public sector banks, including SBI and its subsidiaries.
Maintaining that Indian banks are better placed than their European counterparts, the official said rating agencies are not focusing on European banks despite lower capital adequacy.
"The European banks have capital adequacy which is less than 4% of the Basel II requirements. We are still better than that. These agencies are not downgrading the ratings of those banks which have invested in Greece," he added.
These agencies are at the front-end of investor countries because of the capital they are going to get. Still Italy and Spain are rated higher than other nations, he added.