Bank recap: CRISIL upgrades outlook on 18 PSBs from negative to stable

Rating agency CRISIL has revised its outlook on 18 (PSBs) from “negative” to “stable” after the government announced bank-wise capital infusion and reform plans. It has reaffirmed ratings on various financial instruments issued by The revision in outlook is primarily driven by the government’s recapitalisation programme for this fiscal (2017-18). This will improve the financial risk profile of these and help them meet Basel-III regulatory capital norms. It also provides a cushion against an expected rise in provisioning for (NPAs), CRISIL said in a statement. For ratings assigned to tier I bonds, CRISIL said they have been reaffirmed for nine PSBs and the outlook has been retained as ‘Negative’. The rating agency is evaluating the flexibility with to set off any accumulated losses with the bank’s balance in share premium account and its implication on the availability of eligible reserves to service AT1 coupon payments. “We will revisit our ratings on AT1 instruments once there is clarity”. CRISIL said. On October 24, 2017, after the government announced its Rs 2.11 trillion (Rs 2.11 lakh crore) recapitalisation plan. On Wednesday, the government announced details of bank-wise infusion of Rs 880 billion (Rs 88,000 crore) capital this fiscal.

CRISIL has assessed the impact. PSBs are now adequately placed to meet capital norms and are also better prepared to absorb the hit from provisioning on stressed assets. They will also be in position to absorb hit on account of migration to Ind AS (Indian Accounting Standards).

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