Domestic banks will need Rs 6,00,000 crore capital in nine years to March 31, 2019, which is when the Basel-III norms kick in fully, according to a report by credit rating agency Icra.
Further, if some non-common Tier-I and Tier-II capital instruments get disqualified for inclusion under the regulatory capital, the requirement will rise, it says.
“It could be a challenge to find investors with higher risk appetite to subscribe to the capital requirement of Indian banks,” the report said.
The expected 20 per cent annualised growth in assets along with the need to meet more stringent capital adequacy norms would require banks to mobilise additional capital. Of the Rs 6,00,000 crore, the public sector banks would require 75-80 per cent and private banks 20-25 per cent. However, any variation in the assumed growth rate might lead to a change in the volume of capital required, it added.
“Once Basel-III comes into force, some public sector banks are likely to fall short of the revised core capital adequacy requirement and will therefore depend on government support to augment their core capital,” the ratings agency said.
In recent times, government support has come via non-core Tier-I, but this form of support may change in favour of equity capital, especially for banks falling short on core capital.
