Moody's upgrades outlook for Indian banks

Mumbai: Moody's has revised the outlook for the Indian banking system to 'Stable' from 'Negative' suggesting that the deterioration of asset quality since the onset of the coronavirus pandemic has been moderate and an improving operating environment will support asset quality.

In its banking system outlook, Moody's Investors Service said that India's economy will continue to recover in the next 12-18 months with GDP growing 9.3 per cent in the fiscal year ending March 2022 and 7.9 per cent in the following year.

"The pickup in economic activity will drive credit growth, which we expect to be 10-13 per cent annually. Moreover, weak corporate financials and funding constraints at finance companies have been key negative factors for banks but these risks have receded," it said. The basis of Moody's revision of outlook for Indian banking system has been limited impact that the pandemic has on deterioration of asset quality of banks despite relatively limited regulatory support for borrowers. The quality of corporate loans has improved, indicating that banks have recognised and provisioned for all legacy problem loans in this segment.