Good news! Moody’s upgrades outlook for banks from negative to stable

Even though the banking system in the country may have seen some reforms in the past one year under PM Modi’s government, the country’s asset quality continues to be a cause of worry for the NaMo government.

According to an ET report, global credit rating agency Moody’s has noted that the recovery processes for the banks would continue to remain poor and is unlikely to improve in the near future. The global credit rating agency has attributed this dismal projection to the poor financials of many companies that have defaulted or have been restructured under CDR scheme.

On the brighter side, the US credit rating agency has upgraded the outlook for India’s banking sector from negative to stable. This has happened for the first time since 2011 because of the reforms implemented by the current government.

Srikanth Vadlamani, vice president and senior credit officer at Moody's has asserted that the recovery in asset quality of Indian banks will be "U shaped rather than V shaped", thus implying that recovery will be a prolonged process.

However, one must remember that rising provisions for bad loans is not limited to the financials of public sector banks but is a common feature in the books of the private sector banks as well. "Some private sector banks have problems with recognition of NPAs, especially those that have exposure to stressed sectors like power," he said.