Shares of PSU banks rallied on the bourses after the Reserve Bank of India (RBI) extended the deadline for meeting the Basel III norms by a year to March 31, 2019.
According to experts, PSU banks are likely to have a harder time trying to raise capital to meet the Basel III norms. "The key issue with SOE (PSU) banks over the next 2-3 years is likely to be lack of capital. The starting point of tier 1 ratios is well below our view of steady state tier 1 for SOE banks under Basel 3 (above 10%)," Morgan Stanley said in a report.
On Thursday, the US-based brokerage Goldman Sachs upgraded Punjab National Bank, Bank of Baroda and State Bank of India, citing likely decline in bad loans as economy improves.