Altman Z-Score Distress Hits PSU Banks and LIC

On Tuesday morning, a Mumbai credit analyst ran a solvency screen across listed public sector financials. He was not looking for trouble. The numbers found it anyway. The Altman Z-Score for [LICI](/stock/LICI) (NSE: LICI), [Central Bank of India](/stock/CENTRALBK) (NSE: CENTRALBK), [Canara Bank](/stock/CANBK) (NSE: CANBK), [Bank of Baroda](/stock/BANKBARODA) (NSE: BANKBARODA), [Punjab National Bank](/stock/PNB) (NSE: PNB), [Bank of India](/stock/BANKINDIA) (NSE: BANKINDIA), [UCO Bank](/stock/UCOBANK) (NSE: UCOBANK), and [Union Bank of India](/stock/UNIONBANK) (NSE: UNIONBANK) all sat below 0.37 as of 2026-09-09. That is deep inside the distress zone. The standard bankruptcy-risk threshold is 1.8. Anything below that signals elevated financial stress. These names are not just below 1.8. They are below 0.37. Edward Altman built the Z-Score in 1968 for US manufacturers. It uses working capital, retained earnings, operating profit, market value of equity, and sales relative to total assets. Banks don't fit the original model perfectly. Deposits and borrowings make bank balance sheets liability-heavy by design. That is why a low Z at a bank is not automatically a death sentence. But the distance matters. Private sector lenders like [HDFC Bank](/stock/HDFCBANK) (NSE: HDFCBANK) and [ICICI Bank](/stock/ICICIBANK) (NSE: ICICIBANK) do not sit at 0.37. They sit closer to 2.0 in most solvency screens. The screen shows individual readings from about 0.12 at LICI to 0.33 at Union Bank. Central Bank of India sits near 0.21. UCO Bank is at 0.18. Canara Bank at 0.29. Bank of Baroda at 0.31. For context, a score below 1.8 has historically flagged elevated bankruptcy risk within two years. A score below 0.5 is an extreme reading. Why the Altman Z-Score Flags PSU Banks The PSU bank complex has traded at single-digit price-to-earnings multiples for years. Investors have accepted that since the 1969 nationalisation, state ownership provides a backstop that reduces tail risk. But the...