Moody's outlook on Indian banks stable
The global rating firm projected India's real GDP to grow 7.2 per cent.
"Our outlook for the Indian banking system is stable, underpinned by healthy economic growth, and weak but stabilizing asset quality," Moody's vice president and senior credit officer.
Srikanth Vadlamani said.
The global rating firm projected India's real GDP to grow 7.2 per cent in the year ending March 2019 and and 7.4 per cent in the following year, driven by investment growth and strong consumption.
It said that the liquidity constraints at non-banking finance companies would be a drag on growth while rising interest rates may pose a risk.
"Asset quality will be stable (but weak) as cleanup of legacy problem loans nears completion and corporate health improves. Banks have recognized the bulk of legacy problem loans and will start making recoveries from large resolved nonperforming loans," Moody's said.
Banks' second quarter performance showed that fresh bad loan creation from corporate books shrunk but retail and agriculture emerged as stress points.
The rating firm however predicted improvement in banks' profitability but high credit costs would keep it muted.