Altman Z-Score Flags 8 Indian Banks, LIC in Distress

The screen that flashed red FairStock's Altman Z-Score screen has put eight Indian banks and one insurer below the 1.8 distress threshold. It's September 16, 2026. The names are NSE: LICI, NSE: CENTRALBK, NSE: CANBK, NSE: BANKBARODA, NSE: PNB, NSE: BANKINDIA, NSE: UCOBANK, and NSE: UNIONBANK. These aren't small finance companies. They are large, state-linked lenders and India's biggest life insurer. The Altman Z-Score flags 8 Indian banks and LIC in distress, but the formula itself deserves a second look. A Z below 1.8 traditionally says distress. A score above 2.99 says safe. Between the two sits grey. The screen is functioning. Banks run high balance-sheet debt by design. That's the starting point for any investor who wants to use this signal rather than fear it. Why banks break the score Edward Altman built the original model for manufacturing companies, not financial firms. A bank does not have inventory or cost of goods sold. Deposits are liabilities, not sales. Retained earnings are small relative to a loan book. The formula treats total liabilities as a danger sign. For a bank, those liabilities are the raw material. A deposit-funded bank with an 11% capital adequacy ratio will always look stretched under this lens. Consider [NSE: LICI](/stock/LICI). LIC's balance sheet carries long-duration policy liabilities and a large government bond portfolio. The Z-Score sees debt. It does not see embedded value or persistency ratios. It also ignores solvency margins. LIC's solvency position sits comfortably above the regulatory floor, which the score ignores. [NSE: BANKBARODA](/stock/BANKBARODA) and [NSE: CANBK](/stock/CANBK) have cut net non-performing assets since the 2018-2020 credit cycle. Their current ratios look ordinary, not insolvent. Yet the formula penalizes them for holding deposits. This doesn't make the screen useless. It makes the screen a filter, not a judge. Investors should ask what the flag is actually flagging: thin returns and high balance-sh...