$6 bn capital raised by PSBS inadequate to safeguard against stress: Fitch

PSB divestment may trigger negative rating action

The public sector banks’ plan to raise $6 billion in fresh equity capital is inadequate to mitigate anticipated risks from economic disruptions caused by the Covid-19 pandemic. They will need additional capital support from the government, their owner, to absorb stress, according to Fitch Ratings.

The rating agency also warned that reduction in the state's majority shareholding in some banks may dent depositor confidence and could lead to negative rating action as their long-term ratings are anchored to state support.

Several large state-owned banks have recently announced plans to raise a total of around $6 billion in fresh equity from the capital