Indian public sector banks will need around $65 billion (nearly Rs 4.16 lakh crore) of additional capital by 2019 to address the problem of non-performing assets, Fitch Ratings said on Monday. This additional money is required to raise loan growth and tackle weak provisionings for rising bad loans. “The gross non-performing loan ratio reached 9.7% in financial year 2017, up from 7.8% the previous fiscal,” said the agency.

The additional capital is also likely to help the banks meet the new Basel III standards. Basel III is a set of reform measures to strengthen the regulation, supervision and risk of the banking sector. It was developed by the Basel Committee on Banking Supervision. The norms are expected to be implemented by the end of the 2018-2019 financial year.

The credit ratings agency said the capital needs of Indian banks have dropped from the earlier estimate of $90 billion (nearly Rs 5.75 lakh crore) because of asset rationalisation and weaker-than-expected loan growth. However, state-run banks still have limited options to raise the money they need.

“State banks are likely to be dependent on the state to meet core capital requirements,” Fitch Ratings said. “The government is committed to investing only another $3 billion in fresh equity for 21 state banks over FY18 and FY19 [the current and next financial years], having already provided most of the originally budgeted $11 billion.”

Fitch Ratings added that the loan growth of the Indian banks had dropped to 4.4% in 2016-2017 – the lowest in several decades. “Many state banks, particularly smaller ones, will struggle to survive as individual banks and could be swept up into the government’s consolidation agenda.”