Sensex edges lower but post second straight weekly gain

MUMBAI (Reuters) - India's stock markets edged lower on Friday as private lenders retreated after the Reserve Bank of India's stress tests showed a significant jump in bad loans for the sector, but indexes still posted a second consecutive week of gains.

The Reserve Bank of India said late on Thursday the ability of India's debt-burdened firms to repay their debts has worsened as leverage has increased, straining a banking sector burdened by bad loans.

Sentiment was also hit after Greece failed again to reach an agreement with its creditors and stumbled towards a default, while China shares plunged more than 7 percent as retail investors sold heavily.

But local shares continued their rebound after hitting their lowest levels this year earlier this month.

The 30-share BSE Sensex fell 0.3 percent to 27,811.84 points on Friday, but rose 1.8 percent for the week.

The 50-share Nifty lost 0.20 percent to 8,381.10 points, but rose 1.9 percent for the week.

Among the private lenders, ICICI Bank Ltd lost 0.98 percent, while Axis Bank Ltd fell 0.8 percent.

(Reporting by Abhishek Vishnoi and Rafael Nam; Editing by Prateek Chatterjee)