Latest Moody’s report: In its latest report, Moody’s Investors Service claimed that the asset quality of Indian banks and Southeast Asian countries will stabilize in 2023. The credit rating agency said this in its report on the banking sector in emerging markets.
In its report, Moody’s asserted that Indian banks would benefit from a stable operating environment and a substantial increase in their solvency indicators. It further said that high inflation and rising interest rates will gradually increase margins, thereby increasing the revenue of banks.
However, banks are well-positioned to handle a potential increase in problematic loans due to stricter underwriting standards and adequate reserves. On the other hand, rising debt servicing costs and slowing economic growth present asset risks for banks.
Inflation will fall but is expected to remain high in 2023
According to the report, the rate of inflation will fall in 2023 but will remain high while the economic slowdown is expected to be moderate. Moody’s also noted that capital inflows enhance the funding and liquidity of banks in emerging markets.
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It is to be noted here that capital inflows into India during the first nine months of 2022 remained above 2% of its GDP. The credit rating agency also warned that emerging markets are also facing the double whammy of inflation and currency depreciation.
(With inputs from IANS)