Weekly Current Affairs

Moody’s sees slower pace of new bad loans [Economy]

  • India’s banking system is moving past the worst of its asset quality slump, according to Moody’s Investors Service which also said while the number of bad quality loans may still increase, the pace will start slowing.
  • This outlook is based on the company’s analysis of five key factors—operating environment, asset risk and capital (stable), funding and liquidity, profitability and government support.
  • Operating environment for Indian banks is supported by a stabilising economy.
  • Moody’s baseline scenario assumes headline GDP growth of 7.4 per cent over the next two years compared with 7.3 per cent in 2015, with key drivers being a favourable monsoon season, ongoing public investment, and continued growth in foreign direct investment.
  • Asset quality will remain a negative driver of the credit profiles of most rated Indian banks.
  • However, the pace of deterioration in asset quality over the next 12-18 months should be lower than what was seen over the last five years.