Moody’s, however, said loans to small and medium-sized enterprises continue to pose risks to banks’ asset quality because this segment is the most vulnerable to rises in interest rates.
India’s banking sector outlook remains stable and is supported by economic growth and improved financials, Moody’s Investors Service said on Wednesday. In the last few weeks, concerns were raised about the health of Indian banks after a damaging report was published by the US-based short-seller Hindenburg Research on the Adani Group.
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The global rating agency said while it expects the country’s real GDP growth to moderate in the fiscal year ending March 2024, India’s underlying growth potential is fundamentally strong, which will support banks’ credit growth and asset quality.
However, the agency said, loans to small and medium-sized enterprises continue to pose risks to banks’ asset quality because this segment is the most vulnerable to rises in interest rates.
