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Business EconomyPosted at: Oct 19 2021 2:54PM


Moody's revises the outlook for Indian banking system to stable from negative

New Delhi, Oct 19 (UNI) Moody's Investors Service on Tuesday revised the outlook for the Indian banking system to stable from negative.
The rating agency said that deterioration of asset quality since the onset of the coronavirus pandemic has been moderate and an improving operating environment will support asset quality.
"Declining credit costs as a result of improving asset quality will lead to improvements in profitability. Capital will remain above pre-pandemic levels," Moody's said in its report.
The report said that operating environment will be stable as the economy gradually recovers from the pandemic.
Moody's expects the GDP to grow at 9.3 per cent in the current fiscal and 7.9 per cent in the next year. The pickup in economic activities will support credit growth to the tune of 10-13 per cent annually.
Moody's said that quality of corporate loans has improved indicating that banks have recognised and provisioned for all legacy problem loans in this segment.
"The quality of retail loans has deteriorated, but to a limited degree because large-scale job losses have not occurred. We expect asset quality will further improve, leading to decline in credit costs, as economic activity normalises," it said.
The rating agency noted that banks’ returns on assets will rise as credit costs will decline while banks' core profitability will be stable.
"If interest rates rise, net interest margins will increase, but it will also lead to mark-to-market losses on banks' large holdings of government securities," it said.
UNI NK
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