Pressure on Indian finance cos due to NBFC crisis: Moody’s

New Delhi: Global rating agency Moody’s on Monday said pressure on Indian finance companies continues to build up, with some banks heavily exposed to non-bank credit providers, hinting that India’s NBFC crisis is far from over, even after a year since the troubles began when a major shadow bank IL&FS Group abruptly defaulted.

“Most Asia Pacific (APAC) banks have passed Moody’s stress test on capital, except the banks in India, Mongolia, Sri Lanka, and Vietnam, because banks in these jurisdictions have lower starting capital ratios and higher starting problem loan ratios,” the rating company said.

Moody’s Investors Service’s outlook for the banking industry in the Asia Pacific is negative over the next 12 months because owing to the US-China trade dispute, which will weaken economic and trade activity in the region, and erode investor confidence.

“Weaker economic and trade conditions will lead to moderate increases in problem loans for APAC banks,” said Eugene Tarzimanov, Moody’s Vice President and Senior Credit Officer.

“Meanwhile, the banks’ profitability will fall, because they are raising credit provisions while central banks are cutting interest rates to support economic growth,” said Tarzimanov.

Nevertheless, Moody’s said that APAC banks have generally maintained good capital and liquidity buffers and the probability of government support for these banks will stay high, except for the banks in Hong Kong, because the territory is the only jurisdiction in APAC with an operational resolution regime. (IANS)

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