India Sets Rules to Push Struggling Banks to Combine With Rivals

India’s banks, staggering under the world’s highest bad-asset ratio, may be pushed to wind up or combine with rivals if their capital levels fall below set ratios under new guidelines issued by the country’s central bank.

The new framework would apply to all banks operating in India, including foreign lenders, according to a document posted Thursday on the Reserve Bank of India’s website. Along with capital levels, the guidelines will assess a bank’s asset quality, profitability and debt levels and allow the RBI to mandate a range of corrective actions, from requiring the owners or parent to bring in fresh capital, to restricting branch expansion both at home and overseas, to curtailing management compensation and director’s fees, according to the statement.