Bank recapitalisation plan: Provisioning ratio to improve 1,800-1,900 bps

Estimates by rating agencies and analysts peg the capital requirement of PSBs for providing for NPAs at Rs 2.50 lakh crore

The government’s Rs 2.11-lakh-crore plan to recapitalise public sector banks (PSBs) has been well received by the markets, as it is seen as a bold move to fix the banking sector’s problems. 

Most PSBs have been in a fix due to rising non-performing assets (NPAs) and the lack of capital to provide for these NPAs as well as push loan growth. Likely implementation of the Indian Accounting Standards (IndAS) from April 1, 2018, would also require an aggressive increase in provisioning. 

While the move to shore up PSBs’ capital is a welcome step and seen as a game-changer, it has