Indian financial institutions have been on a capital raising spree amid growing uncertainty about the impact of COVID-19 pandemic on their books. A slew of banks, non-bank lenders and others have either raised capital or at least announced plans to raise capital since the outbreak of the virus.

The latest lender to join this growing list is ICICI Bank. The bank is set to consider an equity raising plan in its board meeting on July 8. While the bank did not disclose the amount of capital it is looking to raise, it is expected to be a large amount. This will be the bank’s first equity capital raising exercise in the last 13 years. ICICI Bank last raised Rs 20,000 crores back in 2007 and has not used the route to raise money since. It has, instead, divested stake in various subsidiaries to raise capital from time to time.

Among its peers, Axis Bank recently announced its plan to raise up to Rs 15,000 crores this year. This is the second such proposal in less than a year. Axis recently raised Rs 12,500 crores via a Qualified Institutional Placement (QIP) in September of 2019.

IDFC First Bank was one of the first private banks to hit the market earlier in May when it raised Rs 2,000 crores via a preferential issue. Kotak Mahindra Bank followed soon after to raise Rs 7,442.5 crores via a QIP.

Among non-bank lenders, Housing Finance Development Corporation (HDFC) Limited has announced its plans to raise upto Rs 14,000 crores equity through the year largely to meet inorganic growth opportunities. L&T Finance also plans to raise Rs 2,000 crores by issuing preference shares via a public offering for private placement in the current fiscal. JM Financial raised Rs 770 crores via a QIP earlier in June.

Among public sector banks, State Bank of India recently took an enabling resolution of Rs 20,000 crores of capital raise, but its Chairman Rajnish Kumar told CNBC-TV18 earlier that the bank is unlikely to raise this money in the near future. Bank of Baroda also has approvals in place to raise upto Rs 13,500 crores in the current financial year.

A recent report by Fitch Ratings pointed out that Indian banks may have to raise USD 20-50 billion over the next year as bad loans and credit costs rise due to the pandemic induced economic slowdown. Credit Suisse had also recently pegged the banking system’s capital requirement at over USD 20 billion, with USD 13 billion out of that for public banks alone.

Standard & Poors Global Ratings estimates that bad loans will rise to 13-14 percent of al loans in this fiscal on the back of COVID19 related delinquencies. While the actual impact on asset quality will only be known after the regulator permitted moratorium on loan repayments ends in August, banks, both strong and weak, have started building buffers.

First Published:Jul 6, 2020 1:52 PM IST