The problem has been accentuated with the Reserve Bank of India now writing to bank to meet their obligation towards interest on interest for all borrowers where exposure is over Rs 2 crore as well. This will put additional burden of close to Rs 7,500 crore on banks.
Moreover, the SEBI, though has amended the valuation rule of perpetual bonds in line with objections raised by the finance ministry, it still has said that from April 2023 onwards, the residual maturity of AT-1 bonds will become 100 years from the date of issuance of the bond. This will make the most used route of raising capital by banks less attractive.
On its part, the government is strengthening the banking segment by merger and amalgamation of PSBs. Since 2017, this exercise has resulted in seven large and five smaller PSBs. The measures (based on bad loans and regional factors) were intended to help manage capital more efficiently. But emerging regulatory needs and pandemic affected businesses continue to pose challenges for banking segment.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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