According to the ratings agency, deteriorating asset quality and earnings are likely to constrain the credit profiles of Indian banks over the next two years
Ratings agency Standard & Poor's (S&P) has said that Indian banking sector is unlikely to recover in the next 18-24 months as slow economic growth is constraining the corporate sector, the chief recipient of banking credit.
"Deteriorating asset quality and earnings are likely to constrain the credit profiles of Indian banks over the next two years," said Standard & Poor's credit analyst Geeta Chugh. "We no longer expect the corporate sector to mildly recover in fiscal 2014, given slower-than-expected GDP growth, heightened currency volatility, and high interest rates," she added.
In a report titled 'Slack Economic Growth Dents Recovery Prospects For Indian Banks', the ratings agency said it expects the banking sector's non-performing loan (NPL) ratio to surge to 3.9% of total loans in FY2014 and to 4.4% in DY2015, compared with 3.4% in FY2013. The return on assets should also remain depressed, at about 0.9%.
Indian banks have restructured 5.7% of their aggregate loan balances as of March 2013. The Reserve Bank of India (RBI) allows banks to exclude these loans from their reported NPLs until fiscal 2015. "We expect restructuring to remain high in the next two years because of the weak economy and the regulatory allowance," S&P said.
"The corporate sector's weak performance, combined with high interest rates and a weak rupee, is likely to weaken debt servicing for these companies," said Standard & Poor's credit analyst Mehul Sukkawala. "We believe that the infrastructure (power and road), metals and mining, construction, and capital goods sectors are particularly at risk," he said.
The ratings agency also revised its forecast for India's GDP growth to 5.5% for FY2014 from 6.0%.
The apex court refused to grant an interim stay on Bombay High Court verdict that declared the two-member probe panel set up by BCCI as illegal
The Supreme Court on Wednesday refused to grant interim stay on Bombay High Court verdict agreed to hear the petition filed by Board of Control for Cricket in India (BCCI) challenging the High Court's judgement.
The Bombay HC has declared as illegal and unconstitutional the BCCI's two-member enquiry panel set up to look into spot fixing and betting charges in the Indian Premier League (IPL) tournament.
A bench of justices AK Patnaik and JS Khehar asked Cricket Association of Bihar, on whose plea the high court had delivered its verdict, to file its response on BCCI's petition within two weeks and posted the matter for hearing on 29th August.
The HC order had come on 30th July just two days after the panel, comprising two former judges of the Madras High Court Justices T Jayarama Chouta and R Balasubramanian, submitted its report giving a clean chit to all those against whom the probe was conducted.
The panel had gone into the charges against India Cements Ltd, owners of IPL franchise Chennai Super Kings, its former Team Principal Gurunath Meiyappan, son-in-law of BCCI's President-in-exile N Srinivasan and Raj Kundra, co-owner of Rajasthan Royals.
BCCI and IPL Governing Council after surfacing of the betting and fixing scandal set up the panel.