Indian banks will need $200 billion additional capital over the next five years to meet Basel III capital adequacy norms and the demand for funds as growth picks up, according to Fitch Ratings.
The rating agency expects improvement in asset quality of Indian banks with pick up in economic growth.
"Progress will be led by improvement in the cyclical sectors, which is likely to benefit from a sustained economic recovery," it said.
The state-owned banks reported stressed assets of around 12 per cent in 2013-14, versus around 4 per cent of private banks and 10 per cent for the banking system, according to Fitch.The agency said it "expects Indian banks to require over $200 billion in capital as growth picks up and banks progress towards Basel III."
Fitch said there is emergence of some early signs of stability in asset-quality at certain large state-owned banks.