Bankers criticise Moody’s downgrading of Indian Banking sector

“Indian banking system is not at risk. The downgrade is not justified at this point of time because it is premature,” HDFC Chairman Deepak Parekh told reporters in Mumbai.

He was responding to the decision of the US based ratings firm Moody’s to lower the outlook of the Indian banking system to “negative” from “stable”.

A “negative” outlook reflects volatility and uncertain conditions and would increase the cost of borrowing in overseas markets.

“The Indian banking system does not warrant a downgrade in outlook. There is nothing happening as such to change the outlook,” Punjab National Bank CMD K R Kamath said. He said the 18% credit growth projection for the current fiscal is quite healthy for the Indian banking system.

Moody’s has said that slow growth, both in domestic and foreign economies, is putting stress on banks’ asset quality, capitalisation and profitability.