Govt bailout for PSU banks at max NPA level to be $1.7 bn

Govt bailout for PSU banks at max NPA level to be $1.7 bn Mumbai: The total bailout amount required to rescue public sector banks in case of maximum stress caused due to non-performing assets will be around USD 1.7 billion, a top company official of India Ratings and Research said.

"At a maximum stress level of NPA, which is considered to be around 13-14 percent of total assets, government requires USD 1.7 billion to bail out the public sector banks," Director (Financial Institutions) of India Ratings, Ehsan Syed told reporters here.

India Ratings, the fully-owned subsidiary of Fitch Ratings, has done a stress test on banking system taking into account factors like cyclical factors of the economy, exposure to infrastructure sector and concentration to single corporate houses among others.

Syed, however, said that the banking system as a whole is well-capitalised and can withstand shocks arising out of the factors considered by the rating agency in its stress test.

Talking about infra exposure of banks, he said some banks might face asset-liability mismatch kind of situation due to higher exposure to infra sector.

"While deposits garnered by banks are short-term in nature, typical infra loans are long-term. So, banks having higher exposure to infra sector may witness asset-liability mismatch unless they search some alternatives for funding such projects," Syed said.

PTI