Stress assets of domestic banks to peak at around 15%: Fitch

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A Fitch report said that the asset quality indicators for the domestic banks continue to deteriorate, and stressed assets are likely to peak around 15 per cent due to further weakening of the economic environment.

"The asset quality indicators for Indian banks continue to deteriorate and will likely reach levels much worse than previously expected due to further weakening in the economic environment," it said.

"We expect the proportion of stressed assets to peak at around 15 per cent."Stressed assets of domestic banks were at 9.1 per cent of total loans (which includes non-performing loans of 3.4 per cent and restructured loan ratio of 5.7 per cent) in FY'13 from 6.1 per cent in FY'12, said PTI report.

Meanwhile, Fitch said that the private sector banks have superior credit profile supported by their robust earnings profile, lower stressed assets and strong capital position.

As per the report, state-owned banks may not seek funding through equity market route in the near to medium-term due to their weak performance, adding to the dependence on the government for capital infusion.

It, however, said, "Funding for Indian banks is generally satisfactory though liquidity is expected to remain tight in the near-term."

Dion Global Solutions Ltd.

Story first published: Tuesday, October 1, 2013, 9:10 [IST]
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