A recent survey by Moody’s highlights that banks in the Asia-Pacific region, including India, have built stronger capital buffers compared to their counterparts in the United States and Western Europe. The findings reflect the impact of prudent regulatory oversight, risk management practices, and strong internal capital generation over the past decade.
Key Findings: CET1 Ratios
Common Equity Tier 1 (CET1) ratios, a key measure of a bank’s capital strength, show Asia-Pacific banks outperforming major banks in the U.S. and Europe:
| Region / Country | Average CET1 Ratio (End-2024) |
| Hong Kong | 18.0% |
| India | 14.7% |
| Korea | 14.5% |
| Western Europe | 13.8% |
| United States | 13.5% |
Higher CET1 ratios indicate superior shock-absorption capacity and resilience to financial stress.
Drivers of Strong Capital in Indian Banks
- Robust internal capital generation: Private-sector banks like SBI, ICICI Bank, HDFC Bank, and Axis Bank have grown equity faster than risk-weighted assets (RWA).
- Seamless access to capital markets: Enables timely equity mobilization when required.
- Regulatory oversight: Prudent rules and monitoring have helped maintain healthier balance sheets.
CET1 capital, comprising core equity and retained earnings, serves as the first line of defence against financial stress.
Risk-Weighted Asset (RWA) Insights
- Asia-Pacific banks: RWA densities are aligned with actual asset risks and credit losses but vary across markets.
- Higher RWA density reflects larger shares of risk-bearing assets, necessitating stronger capital buffers for stability.
Private vs Public Sector Banks in India
| Bank Type | Capital Strength | Notes |
| Private-sector | High | Includes SBI, ICICI, HDFC, Axis; strong CET1, robust RWA management |
| Government-owned | Lagging | Lower CET1 and leverage metrics compared to private banks |
The four major private Indian banks represent nearly 50% of total system assets, underscoring their critical role in systemic stability and supporting India’s expanding financial ecosystem.
Conclusion
The Moody’s report confirms that Indian and Asia-Pacific banks are well-capitalized, providing resilience against shocks and supporting sustainable growth, while also highlighting areas for improvement in government-owned institutions.
Disclaimer:
This article is intended solely for educational and informational purposes. The securities or companies mentioned are provided as examples and should not be considered as recommendations. Nothing contained herein constitutes personal financial advice or investment recommendations. Readers are advised to conduct their own research and consult a qualified financial advisor before making any investment decisions.
Investments in securities markets are subject to market risks. Please read all related documents carefully before investing.