Indian banking system resilient to absorb hard knocks: India Ratings

Indian banking system is better placed when compared with other countries

Despite sharp rise in stressed assets – bad loans and restructured assets, in recent times, Indian Banks are least susceptible to macro risks in climate of slowdown, according to Atul Joshi, chief executive India Ratings.

 

Joshi, CEO and managing director of rating company said Indian banking system is (placed at one degree) better placed. The countries like Singapore (2 position) and China and Hong-Kong (both in 3 degree) with higher proportion of loans in relation to gross domestic product (GDP) carry moderate to high susceptibility. 

 

With economic slowdown gripping Indian Economy for third year in a row, the level of NPAs of banking system have grown substantially in last 18 months. 
 

The credit to GDP ratio of India is around 75% while that of Singapore is 150%. Hong Kong is even higher at 600%, Joshi told reporters on the sidelines of banking seminar. The event was organized by Indian Bank’s Association and Federation of Indian Chambers of Commerce and Industry.

 

The stress tests on Indian banking loan portfolio assuming 4% gross Non-performing asset levels plus 8% restructured book showed a capacity to withstand pressures. Banks have done fine pricing for NPAs.
 

They (Indian Banks) have reported reduced profits but no bank has reported loss in last five quarters. “We are not sinking”, he added.

 

Funding to infrastructure has posed challenges to Indian banks. While the payback period from projects is 5-30 years, the funding is for maximum for 15 years. The corporate restructuring is prevalent in India. The pain will continue of 3-4 years. 

 

Retail is in a sweet spot with higher loan growth than overall pace of advances. The slippages are lower than other segments.