Altman Z-Score Flags Distress Across Indian Banks, LICI

FairStock.ai ran its Altman Z-Score screen this week. Eight Indian financial names landed below 1.8, the standard distress cutoff. Life Insurance Corporation of India ([LICI](/stock/LICI)) made the list. So did seven public sector banks: [Central Bank of India](/stock/CENTRALBK), [Canara Bank](/stock/CANBK), [Bank of Baroda](/stock/BANKBARODA), [Punjab National Bank](/stock/PNB), [Bank of India](/stock/BANKINDIA), [UCO Bank](/stock/UCOBANK), and [Union Bank of India](/stock/UNIONBANK). All eight sit in the model's distress zone. That's true even though several trade at low price-to-earnings multiples and a couple post decent returns on capital employed. Most of the banks carry debt-to-equity ratios above 10. Deposits are the reason. The classic Altman formula wasn't built for banks, but the liability side still matters. The global backdrop doesn't help. US rate expectations have stayed higher. The dollar is firm. Foreign portfolio money has to clear a higher bar to flow into Indian financials. This screen arrives when the market has little patience for heavy balance sheets. What the 1.8 threshold means for PSU banks The 1.8 cutoff is the standard Altman Z marker for distress in non-financial companies. Banks don't fit Edward Altman's 1968 model cleanly. Deposits are booked as liabilities, so Indian lenders can run debt-to-equity ratios above 10 without the same operating failure risk as a manufacturer. That doesn't make the screen useless. It's a liability flag, not a bankruptcy forecast. The flagged names are mostly state-owned lenders with thin common equity cushions relative to their deposit bases. [Central Bank of India](/stock/CENTRALBK) and [UCO Bank](/stock/UCOBANK) have traded at low single-digit P/E ratios in recent quarters, yet the screen still puts them below 1.8. At a P/E of 8, the earnings yield is 12.5%. That looks tempting until the liability side reprices. [Bank of Baroda](/stock/BANKBARODA) and [Canara Bank](/stock/CANBK) carry larger corpora...