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

Most trending stories
Photo Gallery
Bollywood Actress Kareena Kapoor Khan,Director Rakesh Omprakash Mehra,Minister Roshan Baig...

Bollywood Actress Kareena Kapoor Khan,Director Rakesh Omprakash Mehra,Minister Roshan Baig...

Dancers perform during the inauguration of the 10th Bengaluru International Film Festival...

Dancers perform during the inauguration of the 10th Bengaluru International Film Festival...

Carolina Kostner of Italy performs during the women's free figure skating final in the...

Carolina Kostner of Italy performs during the women's free figure skating final in the...

Prime Minister Narendra Modi with his Canadian counterpart Justin Trudeau, First Lady...

Prime Minister Narendra Modi with his Canadian counterpart Justin Trudeau, First Lady...

Russian athlete Ivan Telegin (7) skates with the puck against Jakub Nakladal (87)...

Russian athlete Ivan Telegin (7) skates with the puck against Jakub Nakladal (87)...

A motorcycle rider performs stunts at the 'Hamburg Motor Days' fair in Hamburg, Germany...

A motorcycle rider performs stunts at the 'Hamburg Motor Days' fair in Hamburg, Germany...

Tourists ride on horses after snowfall at Anjni Mahadev near Manali on Friday...

Tourists ride on horses after snowfall at Anjni Mahadev near Manali on Friday...

Canadian Prime Minister Justin Trudeau signs the visitor's book as his son Hadrien looks on...

Canadian Prime Minister Justin Trudeau signs the visitor's book as his son Hadrien looks on...

The Swedish team celebrates their gold medal after the venue ceremony at the men's...

The Swedish team celebrates their gold medal after the venue ceremony at the men's...

Rajasthani folk artists perform at historical Govind Dev Ji temple during the 'Fag Mahotsav'...

Rajasthani folk artists perform at historical Govind Dev Ji temple during the 'Fag Mahotsav'...

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.