iStockAnalyst: (Source: Info-Prod Research (Middle East))The outlook for India’s banking system remains stable, reflecting favourable operating conditions, solid capital levels that remain sound in stressed scenario analysis, a strong retail deposit funding base, and sound liquidity, says Moody’s Investors Service in its new Banking System Outlook on India.
The banking system outlook expresses Moody’s expectations for the fundamental credit conditions in this banking system over the next 12-18 months. The report notes that the operating environment for Indian banks is likely to remain conducive to high credit growth, as GDP growth trends back up to its pre-debt-crisis level of close to 9% per year, and an increasing proportion of the young population is moving into the “bankable” sector of the population. “These positive factors are balanced by the still-high levels of inflation in India, the need to manage the accelerating pace of loan growth and recent asset-quality challenges (particularly in consumer lending).
We also see an increased risk of probable asset bubbles forming and posing a medium- to longer-term challenge for the banking system,” explains Nondas Nicolaides, Moody’s vice president, senior analyst, and author of the banking system outlook. “We see risks of an overheating economy given our expectation of continued strong economic and credit growth, while real estate prices in metropolitan areas and equity markets have already recaptured their pre-crisis peaks. Read more…..
Hat tip to Sanjeev Kulkarni