NEW DELHI: Moody’s Investors Service on Tuesday raised the outlook for Indian banking system ‘Stable’ from ‘negative’, citing a moderate deterioration in asset quality since the start of the pandemic and a possible pick-up in credit growth with the economic recovery.
Moody’s expects India’s economy to continue to improve over the next 12-18 months, with GDP growing 9.3 percent in the fiscal year ending March 2022 and 7.9 percent next year.
“Economic activity will drive credit growth, which we expect to be 10-13 per cent year-on-year,” Moody’s said. Weak corporate finance and lack of funding in finance companies have been major downside factors for banks, but These risks are reduced.” In its ‘Banking System Outlook – India’ report.
The quality of corporate loans has improved, indicating that banks have recognized and provisioned all old problem loans in this section.
The quality of retail loans has declined, but to a limited extent, not because of massive job losses.
“We have revised the outlook for the Indian banking system from negative to stable. The decline in asset quality since the start of the coronavirus pandemic has been moderate, and an improved operating environment will support asset quality. As a result of the improvement Declining credit cost will improve asset quality with improved profitability, Moody’s said.
The rating agency is of the view that given their strong relationship with the government, the government will provide a very high level of support to the rated public sector banks.
Earlier this month, Moody’s raised India’s sovereign rating outlook from ‘negative’ to ‘stable’. It also confirmed the sovereign rating at ‘Baa3’.
Moody’s expects India’s economy to continue to improve over the next 12-18 months, with GDP growing 9.3 percent in the fiscal year ending March 2022 and 7.9 percent next year.
“Economic activity will drive credit growth, which we expect to be 10-13 per cent year-on-year,” Moody’s said. Weak corporate finance and lack of funding in finance companies have been major downside factors for banks, but These risks are reduced.” In its ‘Banking System Outlook – India’ report.
The quality of corporate loans has improved, indicating that banks have recognized and provisioned all old problem loans in this section.
The quality of retail loans has declined, but to a limited extent, not because of massive job losses.
“We have revised the outlook for the Indian banking system from negative to stable. The decline in asset quality since the start of the coronavirus pandemic has been moderate, and an improved operating environment will support asset quality. As a result of the improvement Declining credit cost will improve asset quality with improved profitability, Moody’s said.
The rating agency is of the view that given their strong relationship with the government, the government will provide a very high level of support to the rated public sector banks.
Earlier this month, Moody’s raised India’s sovereign rating outlook from ‘negative’ to ‘stable’. It also confirmed the sovereign rating at ‘Baa3’.
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