MUMBAI : The 21-day lockdown to counter the covid-19 crisis, sluggish economic growth and the consequent rise in bad provisions will exert pressure on the capital adequacy of banks, ratings agencies have warned.
The effects, experts said, will be more pronounced for public sector banks (PSBs) where the government has not allocated any infusion in the current financial year and expects them to tap the markets for capital.
Moody’s went to the extent of revising the outlook for the Indian banking system to negative from stable earlier. According to Moody’s, surge in loan loss provision along with a decline in revenue will hurt the profitability of banks, leading to a deterioration of capitalization.