Ratings agency Moody's lowers outlook of Indian banks

NEW DELHI: Moody's, a ratings agency, has brought down the outlook for Indian banks stating that the asset quality of numerous lenders could slip in the upcoming 18 months due to the high inflation levels, monetary tightening and also surging interest rates.

The rating agency has altered its outlook for the Indian banking system to negative from stable. The outlook is applicable for the next 12-18 months.

Mr Vineet Gupta, Moody's Vice President and Senior Analyst, “At the same time, concerns have emerged over the sustainability of the recovery in the US and Europe, and rise in the borrowing program of the Indian government, which could drain funds away from private credit market. With asset quality, given the tightening environment, we anticipate that it will deteriorate over the next 12-18 months, thereby causing an increase in provisioning needs for the banks in FY2012 and FY2013.”

This statement has come while the releasing of Moody's latest outlook for the Indian banking system.

Moody's rates 15 commercial banks in India, which consists of State Bank of India (SBI) and private lender ICICI Bank, which jointly account for almost 66% of the system's net assets until March this year. Currently, the Indian banking sector is dominated by state-owned lenders which account for almost 75% of the market in regard to the asset terms.