INDIA: The specter of credit starvation

Source: Live Mint

“Do Indian banks have enough capital to lend in case the elusive economic recovery materializes later this year? The answer seems to be no, especially since minimum total capital requirements are set to rise this financial year. According to the Reserve Bank of India (RBI)’s timeline for implementing Basel III norms, banks have to provide for a capital conservation buffer of 0.625% of risk-weighted assets by the end of this financial year.

Including this, the minimum total capital requirement will increase to 9.625%. In the next financial year, this increases to 10.25%. While the big state-owned banks such as State Bank of India, Bank of Baroda and Punjab National Bank have relatively comfortable capital positions, the situation is dire for mid-cap public sector banks, which account for around one-third of bank credit.”

Full article: http://www.livemint.com/Money/bC1dVaOmTBDDPnJ2ChbLRP/The-spectre-of-credit-starvation.html

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