Rating agency CRISIL on Thursday said that Indian banks would need to raise Rs 2.7 lakh crore to achieve the tier-1 capital of 8 per cent under Basel-3 capital adequacy norms by March 2018-- the set deadline by Basel committee to meet such norms.
CRISIL said the banks need to raise Rs 1.3 lakh crore as equity Tier-1 capital and up to Rs 1.4 lakh crore in non-equity while adding that raising the former will be easy but latter may be challenging as the norms are quite riskier than under the Basel-2.
CRISIL said there would be some risks in raising non-equity tier-1 capital like discretion on coupon payments and likelihood of coupon non-payment and principal loss if a bank's equity capital falls below the pre-specified thresholds
"It will limit investor appetite for such instruments and will also reduce their attractiveness for banks, as these instruments will be costlier than those under Basel-II," said Ramraj Pai, president, CRISIL.
He added that this risk can be cooled off by development of bond markets to help banks raise the non-equity capital. He also said that a holding company for the state-run banks could help in raising investors' confidence in non-equity instruments.
RBI had estimated the total capital requirement of Rs 5 lakh crore in tier-1 and tier-2 segments. It had estimated Rs 3.25 lakh crore of equity capital and Rs 1.75 lakh crore of non-equity capital for Basel-III requirements.