S&P lauds Rs 70,000 cr capital infusion, says PSB reforms remain lacklustre

The global rating agency's calculation of risk-adjusted capital for most rated Indian PSBs is 5-7 per cent, and this is one of the key rating constraints

Global rating agency Standard and Poor’s (S&P) said today that the government’s decision to infuse of Rs 70,000 crore capital in public sector banks (PSBs) is credit positive for the banking sector. However, it added that the progress of governance reforms at state-owned banks has been lacklustre. 

The capital infusion proposed in the Union Budget for 2019-20 will allow PSBs to take the necessary haircuts on weak corporate loans and help them shore up their capital adequacy. This may also bring some banks out of the Reserve Bank of India (RBI)'s Prompt Corrective Action (PCA), so that they can resume