Altman Z-Score Distress Flags Hit Indian Banks and LIC

On 26 October 2026, FairStock's Altman Z-Score screen lit up across Indian public-sector banks and the country's largest insurer. [NSE: LICI](/stock/LICI) prints a Z-Score of -0.83. [NSE: CENTRALBK](/stock/CENTRALBK) and [NSE: CANBK](/stock/CANBK) sit below 0.4, along with [NSE: BANKBARODA](/stock/BANKBARODA), [NSE: PNB](/stock/PNB), [NSE: BANKINDIA](/stock/BANKINDIA), [NSE: UCOBANK](/stock/UCOBANK), and [NSE: UNIONBANK](/stock/UNIONBANK). That's a lot of red on one screen. But let's slow down. The Altman Z-Score is a formula Edward Altman introduced in 1968 using five balance-sheet and income-statement ratios. It predicts bankruptcy risk for industrial companies. Scores below 1.8 usually mean distress; scores above 3.0 mean safer ground. Banks and insurers, though, carry far more liabilities than a manufacturer by design. So a low score is a flag, not a verdict. What the screen shows LICI's -0.83 is not a typo. The formula subtracts heavy insurance liabilities and thin tangible equity from a business that, unlike a factory, does not sell physical inventory. Public-sector banks, with deposit-funded balance sheets, cluster below 0.4. Central Bank and UCO Bank often carry lower market value of equity relative to total assets, which drags the score. On FairStock's composite score, these names tend to rank lower on risk factors, even when earnings multiples look cheap. The Z-Score screen isolates balance-sheet stress. A stock can have a low P/E and still carry a low FairStock Score if its liabilities are high relative to equity. Investors who use FairStock Scores above 70 as a quality filter should note that most of these names don't clear that bar when balance-sheet risk is weighted heavily. Why low P/E ratios don't settle the debate Many investors see a P/E of 6 or 7 on PNB or Canara and think bargain. The Z-Score says hold on. Cheap earnings can be cheap for a reason: weak asset quality or slow credit growth. A single-digit P/E is not a margin of safety if the ...