Moody’s Maintains Stable Outlook on Indian Banks

Moody’s Investors Service on Wednesday mentioned the banking sector outlook stays secure and is supported by financial development and improved financials. “While we anticipate the nation’s actual GDP development to reasonable within the fiscal 12 months ending March 2024 (fiscal 2024), India’s underlying development potential is essentially robust, which can help banks’ credit score development and asset high quality,” Moody’s said.

However, loans to small and medium-size enterprises (SMEs) continue to pose risks to banks’ asset quality because this segment is the most vulnerable to rises in interest rates. Stating that asset quality of banks will be stable, it said non-performing loan (NPL) ratios will decline modestly because of recoveries and write-offs of legacy problem loans.

“Banks’ profitability will stabilise after improving in the past few years as the boost from declines in loan-loss provisions wanes. Banks’ capital, funding and liquidity will be stable and supportive of credit growth,” Moody’s mentioned.

The US-based score company additionally mentioned the Indian financial system will proceed to develop strongly, regardless of exterior challenges, whereas sustaining a secure outlook for India’s banking system.

Moody’s expects India’s actual GDP to develop 5.5 per cent in fiscal 2024 and 6.5 per cent in fiscal 2025. Although the projected development charges are decrease than 6.8 per cent in present fiscal, it’s nonetheless a powerful degree, supported by home consumption, in addition to authorities capital expenditure.

Moody’s mentioned credit score demand from non-public corporates may also keep robust as inflation will increase wants for working capital and as firms flip to home banks to fulfill their financing necessities at decrease prices.

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