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Tough time ahead for India's banks - S&P

Tough time ahead for India’s banks - S&P

(19 March 2012 – India) United States credit rating agency Standard & Poor’s (S&P) has stated that India’s banks are likely to have a disappointing fiscal 2013 due to slower growth in the country’s economy, rising levels of bad debts and stagnating credit growth. S&P said India’s banks may suffer through to mid 2013 at the earliest.

Credit growth is likely to drop between 16 percent and 17 percent in fiscal years 2012 and 2013 from some 23 percent in fiscal year 2011.

S&P also expects net interest margins to remain tight in fiscal 2013 due to tougher competition exacerbated by low credit growth and higher interest rates that tax borrowers’ abilities to repay.

An S&P analyst said the asset quality of Indian banks is likely to remain weak, or even deteriorate, due to the moderation in economic activity, high inflation and high interest rates.

The ratings agency expects restructured loans to rise in fiscal years 2012 and 2013. Small and midsize companies are particularly vulnerable to the business slowdown.
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