Indian banks have a tough task to raise Rs. 1.67 lakh crore ($30 bn) in next to fuel their growth plans and as a requirement to make transition to Basel III.
Global research firm Macquarie suggested a substantial dilution of equity in the next 5 years because of heavy capital requirement for growth and transitioning to Basel III.
Private sector banks are comparatively better placed, with majority of capital requirement is for PSU Banks, with SBI alone needing to raise nearly half of the amount ($ 14 bn) by 2015 fiscal.
Basel III implementation initiates from 1st January 2013 and most PSU Banks have received capital from government and LIC in FY12. According to Macquarie, these banks would raise large capital in 2H of 2014.
The Indian banks have to be fully Basel III compliant by March 31st 2018.
SBI had estimated that it would require Rs. 980 bn to meet its loan growth of 20% by 2019; the raising of capital would take speed in 2015.
The Basel III norms require banks to keep their common equity at a minimum of 5.5%, which is currently 3.6%; it also requires bank to keep a capital conservation buffer made up of 2.5% of common equity by 31st March 2018.
The banks should attain a minimum capital adequacy of 11.5% by the deadline, currently it is 9%.