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Indian Banks, NBFCs can weather global banking stress
June 15, 2023
Credit profiles of Indian banks and non-banking financial companies will remain resilient despite the challenging global environment, Moody’s Investors Service and ICRA said in a report on Tuesday.
The credit quality of these lenders will be aided by strong domestic demand, improving credit conditions for bank borrowers, strengthened solvency and funding of rated Indian financial institutions.
Going ahead, Moody’s affiliate ICRA expects the banking sector’s performance to remain strong as profitability will be driven by strong loan growth and a favourable credit environment, the report said.
The gross non-performing asset ratio of banks is expected to fall to 2.6% as on March 31, 2024 from 4% as on March 31, 2023.
Credit cost is expected to fall to 0.9% in 2023-24 from 1% in 2022-23. Return on assets is expected to remain at similar levels.
Moody’s contends that the credit conditions in India have gradually improved, with a significant reduction in the banks’ stock of legacy problem loans over the past three years. Also, the financial health of corporates has also risen following a decade of deleveraging.
Additionally, stress among non-bank financial institutions has also abated.
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