Moody’s Maintains Negative Outlook On India’s Banking System

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MUMBAI – Rating agency Moody’s hasmaintained its negative outlook on India’sbanking system, reflecting the negativeeffects of currency volatility, persistentinflation, and slowing economic growth.Asset quality will continue to deteriorate,particularly for public sector banks(PSBs).At the same time, profitability will likelyremain weak, limiting internal capital generation,Moody’s said in a statement.Gene Fang, a Vice President and SeniorAnalyst at Moody’s, said “the operatingenvironment for India’s banking systemcontinues to exert negative pressure onratings of many public sector banks.While structural issues related to the infrastructuresector are not new, the recentdownturn in economic growth has exacerbatedthese problems and increased theirnegative effects on asset quality.”Moody’s just released report titled “IndiaBanking System Outlook” spells outexpectation of how bank creditworthinesswill evolve in this system over the next 12-18 months.