Moody’s outlook for Indian banking system remains negative

Amid pressure of sloping down Indian economy growth by 5.3% in second quarter of fiscal year, another threatening fact raised by Moody rating agency that its outlook on the Indian banking system for next 12 to 18 months remains negative.

As per Moody’s statement, the affect of outlook is due to Indian challenging domestic operating environment which pressuring banking system fall in profitability through slow economic growth, high inflation, high interest rates, and a weak local currency, reports said.

Over Loan growth, the rating agency expected something high at least 15% which help to continue outstripping internal capital generation, facilitating a mask for raise new capital externally.

“We expect these factors to lead to a further deterioration in asset quality, an increase in provisioning costs, and a fall in profitability,” Vineet Gupta, a Moody’s vice president and senior analyst said.

Appreciating government’s recent announced plan of the 150 billion rupees for capital infusion into state banks as per more additional fund requirement, Moody indicates a high probability with extraordinary support of govt.

The plan for capitalization will be finalized in the next few weeks and added in list of the budget for the fiscal year ending in March 2013,  Finance Minister P. Chidambaram said in mid-November.

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