JOIN USGlobal ratings agency Fitch, on Friday, said the Supreme Court’s decision to cancel 122 telecom licences will hit the profitability of banks that had extended credit to these companies by up to 10 per cent.
“Assuming a conservative level of write-offs on these loans, we believe that banks’ credit quality will not be materially weakened, but that annual profits could fall by up to 10 per cent,” it said in a report.
In a report, the agency added that the banking sector should be able to absorb loan-losses on account of the cancellation of licences without it having a major effect on their credit profile.
According to the agency, while the impact of the Supreme Court’s decision is limited, the cancellation of the 2G licences highlights the Indian banks’ exposure to infrastructure, a sector which continues to face high regulatory and execution risks.