Indian banks are boosting balance sheets in anticipation of more soured debts as the coronavirus hammers businesses and leaves millions jobless. Stronger capital will also make it easier to boost lending once the fallout from the pandemic subsides and companies get back to production.
ICICI Bank has already raised about 31 billion rupees by paring stakes in its publicly traded units including ICICI Prudential Life Insurance Co and ICICI Lombard General Insurance Co, according to exchange filings. The lender had a core equity capital ratio of 13.4% as of March 31, more than double the regulatory requirement of 6.125%.
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Lenders including Axis Bank Ltd, Yes Bank Ltd and HDFC Ltd have also announced plans to tap equity capital markets. Kotak Mahindra Bank Ltd has already raised nearly $1 billion rupees.
According to a Credit Suisse Group AG report in May, Indian banks need to raise $20 billion of capital, of which state-owned banks will require $13 billion, to strengthen buffers against potential loan defaults.