Bank shares drop after Moody's changes outlook on Indian banks to negative

Bank shares on Friday dropped up to 15 per cent after Moody's Investors Service changed the outlook for Indian banking system to negative from stable.

Shares of RBL Bank tumbled 14.99 per cent, Kotak Mahindra Bank tanked 7.77 per cent, IndusInd Bank fell 7.33 per cent, ICICI Bank 6.56 per cent, SBI 4.34 per cent.

Also, City Union Bank slumped 4.21 per cent, Axis Bank dipped 3.86 per cent and Federal Bank 3.26 per cent.

The BSE Bank index was quoting lower by 3.74 per cent at 20,098.85.

Moody's Investors Service on Thursday changed the outlook for Indian banking system to negative from stable, as it expects deterioration in banks' asset quality due to disruption in economic activity from the coronavirus outbreak.

It said banks' asset quality will deteriorate across the corporate, small and medium enterprises and retail segments, leading to pressure on profitability and capital.

"We have changed the outlook for the Indian banking system to negative from stable. Disruptions to economic activity from the coronavirus outbreak will exacerbate a slowdown in India's economic growth," Moody's said.