Govt's capital support for PSBs only enough for regulatory norms: Moody's

Stress remains; broader reforms necessary to sustain improvement

Rating agency Moody's on Tuesday said that the Indian government's plan to infuse extra capital in public sector banks in fiscal 2018-19 will suffice only to meet capital adequacy and improve provisions for bad loans in loss-making banks. However, stress will still persist.

Although the government support will help the public sector banks build up their capital and provisioning buffers against losses. These improvements could only prove to be only temporary in absence of any broader reform to fundamentally strengthen their weak underwriting practices.

Without reform, the government will continue to have to inject capital into the banks when they