‘India has more than 50% chance of negative outlook getting confirmed’
ENS Economic Bureau: New Delhi, Jan 22 2013, 01:34 IST
assets. Based on certain assumptions, we estimate that the total capital shortfall of major banks in both countries could reach about $100 billion in 2019”. The Basel III capital reforms encourage banks to strengthen capitalisation, which is a positive rating factor, as it protects them from risks associated with excess credit growth and asset inflation.
Meanwhile, Moody’s on Monday said it has a “negative” outlook on India’s banking system due to concerns over asset quality and the high interest rates. “In India, impaired loans are yet to peak among public sector banks,” Moody’s said in its Asia-Pacific Banking Outlook. The agency further said though the government is “likely to remain supportive”, options for the Reserve Bank to slash lending rates are limited due to high inflation and the “modest fiscal capacity”. However, the report said interest rates are likely to fall during 2013 but still they will remain higher than the rest of Asia.
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