MUMBAI: Rating agency Moody’s on Thursday revised the outlook for the Indian banking system to negative from stable, citing disruptions in economic activity caused by the covid-19 outbreak and an ensuing decline in asset quality.
It said asset quality will deteriorate across corporate, small and medium enterprises (SME) and retail segments, leading to pressure on profitability and capital for lenders.
While funding and liquidity at public sector banks (PSBs) will be stable, Moody’s said, the growing risk aversion in the system following the Yes Bank default will increase funding and liquidity pressure on small private sector lenders. “A deterioration of global economic conditions and a 21-day lockdown imposed by the Indian government in an