Mumbai: India's banks are staring at significant asset-quality challenges for at least the next two years despite regulatory measures, Fitch ratings said on Thursday.
Accordingly, Fitch estimates that the impact on impaired-loan ratios could be anywhere between 200bp-600bp, depending on the severity of stress and banks' individual risk exposures.
"The latest set of measures announced by India's central bank include an extension of the 90-day moratorium on recognition of impaired loans to 180 days, in addition to several relaxations in bank lending limits including allowing banks to fund interest on working-capital loans," the ratings agency said.
"These measures will put a heavy onus particularly on state banks (with already-weakened balance sheets) to bail out the affected sectors, due to their quasi-policy role, considering that much of the state's recently announced stimulus measures is in the form of new loans." (IANS)