More Stories

Informist, Thursday, May 29, 2025

--Moody's: Indian bks' strong fundamentals to shield against trade tensions 

--Moody's:India bks' strong fundamentals to shield against retail loan risks 

--Moody's: Expect system loans to increase 11%-13% in FY26 

MUMBAI – Ample capitalisation and rise in profitability reported for 2024-25 (Apr-Mar) are likely to shield Indian banks from a projected fall in retail credit and a potential fallout from global trade tensions, Moody's Ratings said in a report Thursday. 

In FY25, banks' common equity tier 1 ratio rose, aided by slowing credit growth and better profitability, the report said. The report expects these lenders' capitalisation to "remain strong" in FY26 with the view that internal capital generation would likely match capital consumption. Moody's expects system loans to increase 11-13% in FY26, the report said.

Indian banks had sufficient provisions against non-performing assets, as of Mar. 31, the report said. Some lenders held "sizable countercyclical buffers," it said. These reserves would likely offset a rise in non-performing assets that could result from rising trade tensions and stress in the retail loan segment, the report said. Exposure of Indian banks to sectors likely to be impaired due to dependence on US shipment is around 5.0% of total loans, the report said. The US is India's most important export destination, the report said.

Asset quality of these banks improved in the past two financial years, even though asset quality of retail credit worsened for some banks in FY25, the report said. However, Moody's expects a reduction in default rates for stressed retail loans due to a slowdown in retail loan growth and tightened underwriting standards. 

Growth of deposits in the banking system slightly outpaced the loan growth as of May 2, data from the Reserve Bank of India showed. Moody's expects the ratio of current account and savings account deposits to total deposits to rise, reversing its decline in FY25. This is expected due to cuts in term-deposit rates on the back of policy rate cuts. 

Quality of corporate credit remained strong due to 'deleveraging' by borrowers in recent years, the report said. Banks' profitability is expected to remain healthy, even though Moody's expects a slight moderation due to a fall in interest rates and a minor rise in loan-loss provisioning costs, the report said. Moody's expects banks' liquidity coverage ratio to rise due to the RBI's revised liquidity coverage ratio norms, which will be implemented in Apr. 2026.   End

Reported by Cassandra Carvalho

Edited by Akul Nishant Akhoury

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.