Press Esc to close
Saturday 20 September 2014
News updated at 3:46 AM IST
Weather
Max: 27.8°C
Min : 20.6°C
In Bangalore
Sunny day

Outlook remains negative on banks: Moody's

Mumbai: Dec 5, 2012 DH News Service

Global ratings agency Moody's outlook on the Indian banking system continues to be negative on the backdrop of slow economic growth, rising inflation, high interest rates and a weak rupee.

The Moody's Investors Service -- which had lowered its outlook on domestic banks to ‘negative’ from ‘stable’ in November 2011 -- on Tuesday said that its view for next 12-18 months remained negative since it expects these factors lead to further deterioration in asset quality and push up provisioning costs, besides a dip in profitability.

Also, second quarter results of banks in the current fiscal showed that asset quality of several state-owned lenders had deteriorated, as slowing economy with high inflation and interest rates made it difficult for many corporate and industrial borrowers to service their loans.


In a statement released on Tuesday, Moody's vice president & senior analyst Vineet Gupta said:  “This environment is characterized by slow economic growth, high inflation, high interest rates, and a weak local currency, and we expect these factors to lead to a further deterioration in asset quality, an increase in provisioning costs, and a fall in profitability.”

Moody's point out that the government provides strong support to public sector banks in the form of annual equity infusions, and all banks are mandated to meet loan targets for certain sectors of the economy.

This implies a high degree of involvement by the government in the banking sector and related public accountability.

Also, the ratings agency said loan classification, especially regarding restructured loans, as well as provisioning requirement practices in India is weak.

The government has budgeted Rs 15,000 crore capital infusion in public sector banks for the current financial year.

Unlike last year, when the Centre and Life Insurance Corporation (LIC) infused equity and increase stake, this time the government wants banks to go for rights issue.

Go to Top

Photo Gallery
Bollywood actor Farhan Akhtar at the launch of Coca Cola Zero in New Delhi ...

Bollywood actor Farhan Akhtar at the launch of Coca Cola Zero in New Delhi ...

Sadananda Gowda releasing the logo for a special cleanliness campaign of SCR at Rail Nlayam ...

Sadananda Gowda releasing the logo for a special cleanliness campaign of SCR at Rail Nlayam ...

Manmohan Singh greets Chinese President Xi Jinping as Sonia Gandhi looks on ...

Manmohan Singh greets Chinese President Xi Jinping as Sonia Gandhi looks on ...

Indian flagbearer Sardar Singh carries the national flag to lead the contingent into Incheon ...

Indian flagbearer Sardar Singh carries the national flag to lead the contingent into Incheon ...

Asian Games torch arrive at main stadium for opening ceremony of the 17th Asian Games ...

Asian Games torch arrive at main stadium for opening ceremony of the 17th Asian Games ...

Artists perform during the opening ceremony for the 17th Asian Games in Incheon, South Korea ...

Artists perform during the opening ceremony for the 17th Asian Games in Incheon, South Korea ...

Omar Abdullah inaugurates a reconstructed bridge which was washed away by floods at Gundoora ...

Omar Abdullah inaugurates a reconstructed bridge which was washed away by floods at Gundoora ...

Students take part in a rally aganist the alleged molestation of Jadavpur University female ...

Students take part in a rally aganist the alleged molestation of Jadavpur University female ...

Kashmiri Sikh people preparing food for the flood victims at a relief camp ...

Kashmiri Sikh people preparing food for the flood victims at a relief camp ...

A ballot box is emptied as workers prepare to count ballots at a counting centre in Aberdeen...

A ballot box is emptied as workers prepare to count ballots at a counting centre in Aberdeen...

Copyright 2014, The Printers (Mysore) Private Ltd., 75, M.G Road, Post Box 5331, Bangalore - 560001
Tel: +91 (80) 25880000 Fax No. +91 (80) 25880523