CRISIL, S&P: What the Rating Agencies Say About Budget 2017

S&P says Rs 10K-cr isn’t enough for bank recapitalisation, Crisil feels Budget only ‘mildly supportive of growth’.

Global rating agency S&P on Thursday said the Budget announcement to infuse Rs 10,000 crore into public sector banks is highly insufficient and the lack of capital may delay the clean-up of their balance sheets.

While presenting the Budget, finance minister Arun Jaitely allocated Rs 10,000 crore for recapitalisation of the NPA-laden public sector banks for the next financial year.

While the Budget focuses on the hinterland more, it is only "mildly" supportive of growth that may touch 7.4 percent in 2017-18, said a CRISIL analysis.

Standards & Poor

We believe that this amount (Rs 10,000 crore) is clearly insufficient to recapitalise public sector banks. We think the requirement is much higher. Our estimate is in the region of Rs 2.5 trillion.

Geeta Chugh, S&P Director, Financial Institutions Ratings

She, however, said the finance minister's assurance to provide additional allocation to state-run banks, in case they require it, gives some comfort. She also warned that some of these banks have become so weak that they "could even become takeover targets."

Chugh said with less capital infusion from the government, public sector banks will have to raise money from insurance companies, other government related companies or they will be required to tap capital markets.

CRISIL

We expect a gradual pick up in GDP growth to 7.4 per cent from 7 per cent in 2017-18 as investment cycle is expected to remain weak and consumption demand will likely pick up only moderately despite reduction in tax rates and softer interest rates.

CRISIL

Noting that the Budget is only "mildly growth supportive", CRISIL said the key focus is to revive the rural sector by bolstering agriculture and infrastructure.

Jaitley has performed a “balancing act” by refraining from stretching fiscal coffers to give a steroidal push to the economy, it said, commending the “prudence over populism” in restricting the fiscal gap to 3.2 percent.

Commenting on the drawbacks, it said the one big miss in the Budget is the lack of a roadmap to resolve the banking sector's asset quality and recapitalisation woes.

The target to reduce borrowings to Rs 3.48 trillion is a positive for the bond markets. Concessional tax rates for external commercial borrowings and capital gain benefits for masala bonds will support overseas fundraising.

Elaborating on its growth impact analysis, the note said the push to consumption will only be "mild" because of the measures undertaken and the factors to look out for are the monsoons, softer rates and inflation.

(With inputs from PTI)