There is more to the downgrade of SBI than what meets the eye. Global rating agency Moody's downgraded the unsecured debt and local currency deposit rating by a notch citing asset quality and recapitalisation concerns. The rating agency has also pointed out the bank’s reliance on a fiscally constrained government to maintain capital at levels desired by regulators as another reason for downgrade.
In layman language, SBI does not have money to fund its losses in order to keep its capital in line with the RBI guidelines. Normally the bank would run to the government when its capital adequacy ratio came down, either due to strong growth or rising losses.
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