Standard & Poor’s (S&P) rating agency said on Thursday that a steep rise in interest rates in Vietnam and India would put additional pressure on many borrowers.
“While unsecured consumer loans, including credit card outstanding are always the first to show stress, other loan classes are not immune. Indian banks, due to their sizeable holding of government securities, will face additional pressure on the mark-to-market write-downs on their statutory liquidity ratio portfolios,” said Ritesh Maheshwari, credit analyst with Standard & Poor’s.
The agency pointed out that high inflation prompted most Asian central banks to tighten their monetary policies, which had led to higher interest rates and, in some cases, rationed credit growth. To rein in credit growth, central banks in India, Vietnam, and China have been most hawkish and have raised policy rates and cash reserve ratios, several times. Standard & Poor’s Ratings also made it clear that Asian banking systems might have dodged the turmoil from the US subprime crisis but they were not immune to economic slowdowns.