Press Esc to close

Outlook remains negative on banks: Moody's

Mumbai: Dec 5, 2012 DH News Service 22:02 IST
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

More from this section
Most trending stories
Photo Gallery
A worker applies colour to strings which will be used to fly kites, by a roadside in Ahmedabad...

A worker applies colour to strings which will be used to fly kites, by a roadside in Ahmedabad...

A girl collecting fallen Chinar leaves at a Mughal Garden on the out skirts of Srinagar...

A girl collecting fallen Chinar leaves at a Mughal Garden on the out skirts of Srinagar...

Prakash Raj speaks during a press conference to launch a campaign against the social media troll...

Prakash Raj speaks during a press conference to launch a campaign against the social media troll...

Virat Kohli during a practice session in Nagpur ahead of the 2nd test match...

Virat Kohli during a practice session in Nagpur ahead of the 2nd test match...

Bhuvneshwar Kumar during his marriage with the childhood friend Nupur Nagar....

Bhuvneshwar Kumar during his marriage with the childhood friend Nupur Nagar....

Hockey prayers during their first practice session at the Kalinga stadium...

Hockey prayers during their first practice session at the Kalinga stadium...

Yuki Bhambri of India plays against compatriot Prajnesh Gunneswaran...

Yuki Bhambri of India plays against compatriot Prajnesh Gunneswaran...

Sikh devotees paying obeisance at the Golden Temple on the martyrdom day of Guru Tegh Bahadur...

Sikh devotees paying obeisance at the Golden Temple on the martyrdom day of Guru Tegh Bahadur...

Vehicles moving at snow clad road after snowfall in Lahau...

Vehicles moving at snow clad road after snowfall in Lahau...

Sehwag and Kaif at the announcement of the inaugural edition of St. Moritz Ice Cricket...

Sehwag and Kaif at the announcement of the inaugural edition of St. Moritz Ice Cricket...

Like us on Facebook

Copyright 2017, The Printers (Mysore) Private Ltd., 75, M.G Road, Post Box 5331, Bengaluru - 560001
Tel: +91 (80) 25880000 Fax No. +91 (80) 25880523
Powered by Yodasoft Technologies Pvt. Ltd.