Few days after Union Budget announcement, credit rating agency, S&P Global Ratings has hailed the government’s decision of Rs 70,000 crore capital infusion into public sector banks (PSBs), noting that the move, announced in the Budget, is likely to be credit positive for the banking sector and the economy.
As per rating agency, the capital infusion will help PSBs make necessary haircuts on their weak corporate loans and shore up their capital adequacy. Some banks are also expected to come out of the central bank's prompt corrective action and resume lending and clean up their balance sheets, with this capital infusion plan.
But, S&P Global Ratings expressed need for substantial reforms towards PSBs to improve risk management, service quality, efficiency, and diversity of product offerings, pointing that ‘while the government has infused large amounts of capital into PSBs in the past few years, the progress on reforms has been rather lackluster.’
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