S&P sees stable outlook for banks this FY

At the same time, the sector’s growth is likely to be high in the next two to three years, according to an article titled “India Banking Outlook 2011: Stability Ahead, But Some
Headwinds Remain,” Standard & Poor’s Ratings Services published recently.

S&P foresees credit growth to exceed the nominal gross domestic product growth for the next five years and pegs the credit growth target at 20 per cent in fiscal 2012. Loans to the infrastructure, and metals and mining sectors are expected to increase in fiscal 2012.

However, net interest margins may fall by 25-50 basis points across the board and inflation remains a key challenge, the report says. The article noted that capitalization at Indian banks could dip due to the sector's steady growth. Government-owned banks could need additional capital to support their growth plans.