Altman Z-Score flags distress in LICI, 7 PSU banks

The Altman Z-Score has flagged a distress zone in LICI and seven PSU banks. Life Insurance Corporation of India ([LICI](/stock/LICI), NSE: LICI) posted a score of -0.83. The seven-bank cluster all sat between 0.33 and 0.37. That's well below the 1.8 distress threshold. A negative score from a large insurer and sub-0.4 scores from state-owned banks should not be ignored. This isn't happening in isolation. Sticky global rates have made deposit competition harder for Indian state-owned banks. They pay more to keep depositors while their government bond books face mark-to-market pressure. That squeezes net interest margins, which feeds directly into the weak earnings profiles the Z-Score is picking up. So the flag has a macro anchor, not just a balance sheet arithmetic one. Altman Z-Score distress zone: what the numbers show The standard cutoff is 1.8. Below that, a company sits in financial distress territory. LICI's -0.83 is not just below the line. It's deeply negative. The PSU bank cluster, which includes [CENTRALBK](/stock/CENTRALBK) (NSE: CENTRALBK), [CANBK](/stock/CANBK) (NSE: CANBK), [BANKBARODA](/stock/BANKBARODA) (NSE: BANKBARODA), [PNB](/stock/PNB) (NSE: PNB), [BANKINDIA](/stock/BANKINDIA) (NSE: BANKINDIA), [UCOBANK](/stock/UCOBANK) (NSE: UCOBANK), and [UNIONBANK](/stock/UNIONBANK) (NSE: UNIONBANK), all printed scores between 0.33 and 0.37. That's a narrow band. It suggests a common driver rather than bank-specific shocks. The common driver is the liability side. Banks fund themselves with deposits and borrowings. The Z-Score sees that as debt. When debt-to-equity ratios run above 10, the formula pushes scores toward zero. That doesn't mean these banks are about to fail. It does mean their equity cushion is thin relative to liabilities. For investors, that's a margin of safety question. PSU bank impact: debt-to-equity and low P/E ratios The seven banks carry debt-to-equity ratios between 10.39 and 14.67. That range dwarfs what most industrial companies ...