Industry

Moody’s sees slower pace of new bad loans

India's banking system is moving past the worst of its asset quality slump, according to Moody’s Investors Service which also said while the number of bad quality loans may still increase, the pace will start slowing.

“While the stock of impaired loans may still increase during the horizon of this outlook, the pace of new impaired loan formation should be lower than what it has been over the last few years,” according to a report released by Moody’s Investors Service on Monday.

Key factors

This outlook is based on the company’s analysis of five key factors—operating environment, asset risk and capital (stable), funding and liquidity, profitability and government support.

“The operating environment for Indian banks is supported by a stabilising economy,” the report said. “Moody's baseline scenario assumes headline GDP growth of 7.4 per cent over the next two years compared with 7.3 per cent in 2015, with key drivers being a favourable monsoon season, ongoing public investment, and continued growth in foreign direct investment.”

The asset quality indicator still remains a problem but the picture is getting better on account, according to the report.

Asset Quality

“Asset quality will remain a negative driver of the credit profiles of most rated Indian banks. However, the pace of deterioration in asset quality over the next 12-18 months should be lower than what was seen over the last five years,” the report said.

A letter from the Editor


Dear reader,

We have been keeping you up-to-date with information on the developments in India and the world that have a bearing on our health and wellbeing, our lives and livelihoods, during these difficult times. To enable wide dissemination of news that is in public interest, we have increased the number of articles that can be read free, and extended free trial periods. However, we have a request for those who can afford to subscribe: please do. As we fight disinformation and misinformation, and keep apace with the happenings, we need to commit greater resources to news gathering operations. We promise to deliver quality journalism that stays away from vested interest and political propaganda.

Support Quality Journalism
Recommended for you