Economic woes dent recovery prospects for Indian banks: S&P
Quotes

Economic woes dent recovery prospects for Indian banks: S&P

Last Updated: Wednesday, August 07, 2013, 19:18
 
 Comment 0
 
Economic woes dent recovery prospects for Indian banks: S&P
New Delhi: The Indian banking sector is unlikely to recover in the next 18-24 months due to slow economic growth and deteriorating loan portfolio, said a report by global rating agency Standard & Poor's.

"We base our view on slow economic growth that is constraining the corporate sector, the chief recipient of banking credit," report titled 'Slack Economic Growth Dents Recovery Prospects For Indian Banks' said.

Deteriorating asset quality and earnings are likely to constrain the credit profiles of Indian banks over the next two years, it said.

"We no longer expect the corporate sector to mildly recover in fiscal 2014, given slower-than-expected GDP growth, heightened currency volatility, and high interest rates," it said.

The report expects the banking sector's nonperforming assets (NPA) ratio to surge to 3.9 percent of total loans in 2003-14 and to 4.4 percent in 2014-15, compared with 3.4 percent in fiscal 2012-13.

The return on assets should also remain depressed, at about 0.9 percent, it said.

Banks have restructured 5.7 percent of their aggregate loan balances as of March 31, 2013. The Reserve Bank of India allows banks to exclude these loans from their reported NPAs until 2014-15.

"We expect restructuring to remain high in the next two years because of the weak economy and the regulatory allowance," it said.

S&P has revised its forecast for India's GDP growth to 5.5 percent for 2013-14 from 6 percent.

"The corporate sector's weak performance, combined with high interest rates and a weak rupee, is likely to weaken debt servicing for these companies," it said.

"We believe that the infrastructure (power and road), metals and mining, construction, and capital goods sectors are particularly at risk," it said.

PTI



First Published: Wednesday, August 07, 2013, 19:16


Comments


comments powered by Disqus
G20 Summit 2014
G20 Summit 2014
2014`s Top People in Business: Fortune
2014`s Top People in Business: Fortune
World Bank`s Top 10 Places for Business
World Bank`s Top 10 Places for Business
India`s top ten billionaires
India`s top ten billionaires
Top 10 billionaire cities- In Pics
Top 10 billionaire cities- In Pics

Web Wrap
Contact Us : Privacy Policy : Legal Disclaimer
Copyright © Zee Media Corporation Ltd. All rights reserved