Moody’s out­look for In­dian banks re­mains neg­a­tive

Hindustan Times (Patna) - - FRONT PAGE - HT Cor­re­spon­dent let­ters@hin­dus­tan­times.com

NEW DELHI: Credit rat­ing agency Moody’s on Tues­day said its out­look on the In­dian bank­ing sys­tem for the next 12 to 18 months re­mains neg­a­tive as “as­set qual­ity” was set to weaken due to the cur­rent un­cer­tainty in the macro-eco­nomic en­vi­ron­ment.

In­dian banks have been hit by an eco­nomic down­turn and high in­ter­est rates that have caused a surge in the share of loans that stop yield­ing in­ter­est -- which makes them non-per­form­ing as­sets (NPAs). Moody’s down­graded its out­look for the In­dian bank­ing sys­tem in Novem­ber 2011 from sta­ble to neg­a­tive. “This en­vi­ron­ment is char­ac­terised 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,” said Vi­neet Gupta, vice-pres­i­dent and se­nior an­a­lyst, Moody’s.

The gross non-per­form­ing as­sets of pub­lic sec­tor banks rose to R143,765 crore as of Septem­ber end from R112,489 crore as of end March.

The agency said the government’s high de­gree of involvement in the bank­ing sec­tor and re­lated pub­lic accountability ac­cords higher sys­temic sup­port for the sec­tor.

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