Banks to remain stressed next year too: Fitch
"There is a risk that our initial gross NPA ratio forecast of 3.75 per cent could rise to 4.2 per cent this fiscal due to a more protracted downturn, the impact of which should be felt over the next three-four quarters," Fitch said in a report.
"The stress is not yet completely visible in the reported NPAs, but is clear in the performing restructured loans," it added.
On the negative outlook for the sector, Fitch said it is closely aligned with those of the sovereign, and could be affected by any change in the sovereign rating/outlook.
On Monday, the world's largest rating agency S&P warned of a one-in-three chance of a sovereign downgrade within the next 24 months, citing bloated government finances and poor chances of an improvement in revenue generation and thus narrowing the fiscal gap, which is projected to touch 5.5 per cent this year.
Fitch also said that it believes the slowdown would be more protracted than previously envisaged, compounded by global economic weakness and domestic concerns such as a weak fiscal position and persistent inflation. It further noted that the Q2 GDP numbers are at their lowest in seven years.
About the banking system worries, it said the rising risks come primarily from concentrated exposure of banks to the infrastructure sector which could prove
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