Moody's keeps outlook on banks stable despite weak asset quality

The capitalization at public sector banks (PSBs) will remain weak but government support may provide relief, said Moody's

Global rating agency Moody's has maintained a stable outlook on Indian banks saying that the asset quality, though weak, will be steady. The operating environment for banks is stable, supported by stable economic growth.

"Asset quality will be stable (but weak) as cleanup of legacy problem loans nears completion and corporate health improves. Banks have recognized the bulk of legacy problem loans and will start making recoveries from large resolved non-performing loans (NPLs)," Moody's said in its annual banking system outlook.

This will help shore up asset quality, although the degree of success in resolution of large NPLs will determine