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Large Indian Banks capable of withstanding NPA pressure: Fitch

In its  2013 Outlook series on Indian banks, 2013 Outlook: Indian Banks, NPLs to Rise: Stress Test Highlights Largely Intact Core Equity, Fitch said it expects the banking system's gross non-performing loans (NPL) ratio to reach 4.2 per cent in the financial year to March 2013, up from a previously estimated 3.75 per cent.
 
Fitch Rating also stated that majority of Indian banks appear resilient to the mounting asset quality pressure and have reasonable buffer to withstand stress. The rating agency, however, cautioned that credit quality of domestic lenders is expected to deteriorate further in coming quarters. 
 
"Most banks have a reasonable buffer to withstand increased stress," it said, while it warned a few medium sized banks with poor equity base of possible downgrades if their exposure to stressed assets continues to rise without a corresponding increase in equity buffer.

"Asset quality is likely to remain under pressure at least for the next three to four quarters, particularly from the infrastructure sector in which banks' exposures are concentrated."
 
This is evident in the government's recently announced reforms for struggling state power utilities (around 3 per cent of total system loans). The long-term solution, however, lies in restoring the financial viability of state utilities which carries high execution risk given the political sensitivity around tariff hikes.
According to Fitch the bulk of stress in infrastructure is residing in restructured assets and will not be visible in the reported non-performing loan numbers where pressures are largely cyclical.
 
Most large government and private banks have passed its stress test, Fitch noted. 

A few banks, especially the mid-sized lenders, with high asset concentration and weak equity are more vulnerable. "This leaves their viability ratings vulnerable to downgrade if exposure to stressed assets continues to rise without a corresponding increase in equity buffer," Fitch said. 
 
"Restructured assets in 2011-12 were significantly higher than during the last restructuring exercise in 2008-09. Fitch believes that stressed assets (including restructured assets) for the system will likely exceed the agency's 10% estimate for 2012-13," it said.

 

Sanjay Patel heads Equifax India

MUMBAI: Credit bureau Equifax today said it has appointed Sanjay Patel to lead its business in the country.

Patel, who joins from Polaris Financial Technology, has been ap...

ICRA: Additional provisioning might be required for restructured SEB loans

According to a report by rating agency ICRA on the financial restructuring package of state electricity boards, the banks may have to make additional provisions following...

Loan restructuring to witness an upswing and reach s 3.25 trillion by March 2013: CRISIL

Loan restructuring to witness an upswing and reach s 3.25 trillion by March 2013: CRISIL
Rating agency Crisil Ltd raised the bar for loans that Indian banks will need to restructure this fiscal year to Rs3.25 trillion from Rs2 trillion, mainly because of the ...

CIBIL to role out risk index for corporate

As compared to credit rating, risk index to give rating according to credit history only

The country's first credit information bureau, CIBIL, is mulling to come out with ...

MFIs using information from credit bureaus to curb defaults

MFIs using information from credit bureaus to curb defaults
 
It wouldn’t be wrong to classify past couple of years as the worst possible years for the microfinance industry (MFI).  While addressing an event, Deputy Governor of Res...

Crisil: loan default rate to exceed 3.5%

Rating agency Crisil, expects default rate to exceed 3.5% of outstanding loans in the coming days owing to high interest rates and slowdown in economic growth.
 
"Default r...

Moody’s downgraded debt ratings of 28 Spanish banks

There is no respite coming for Spanish government as Moody’s rating has downgraded long term debt rating of 28 Spanish banks  by one to four notches, pointing to the redu...

Moody's: Despite slow GDP growth, India’s outlook stable

NEW DELHI, JUNE 25: Last couple of months have been rough for Indian government as rating agencies such as S&P and Fitch have changed the rating outlook on India to ‘nega...
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