The domestic economic conditions of India will continue to support growth: Moody’s rating – Times of India

The rates of Moody on Tuesday said that the strong domestic economic environment of India will continue to support economic growth, so that banks can maintain the quality of the health of the assets and keep the number of non -performance loan (NPL) between 2-3 percent in the next 12 months.In a report aimed at the Indian banking sector, Moody stated that even in the midst of increased global economic uncertainties, Indian banks probably remain resilient because of the strength of domestic foundations.“Although trade tensions have been increased worldwide, the domestic economic conditions of India will support growth. That will support the activa quality of banks, although the divergence of the loan performance about various product types and lenders,” said Moody’s as a cited PTI.The report noted that various domestic factors – including increased government capital expenditure, tax reduction for the middle class to increase consumption and supporting monetary policy – will offer a pillow for the banking system. Moreover, the relatively low dependence on India of the trade in global goods offers a certain degree of protection against external shocks.“This will help banks to maintain their activa quality. We expect that the Systemwide Nonforming Loan (NPL) ratio will remain at 2-3 percent in the coming 12 months compared to 2.5 percent at the end of December 2024,” the agency added.Moody’s also emphasized the continuous strength of wholesale loans, stating the profitability of companies and low leverage as key factors. Wholesale loans forms a considerable part of the portfolios of Indian banks, in addition to retail and agricultural loans.The agency warned that uncovered shopping loans would remain more vulnerable than secure loans in the short to medium term.“New NPL formation rates for secure shopping loans have largely remained low, while for uncovered loans, they have risen in the past quarters. While this trend continues, banks of a small private sector will continue to have weaker activa quality than large private banks and banks in the public sector,” said Moody’s.