Moody’s: India banking system view to stable

Moody's Investors Service said it changed its outlook for India's banking system to stable from negative because of the gradual improvement in the operating environment for Indian banks.

"The stable outlook on India's banking system over the next 12-18 months reflects our expectation that the banks' gradually improving operating environment will result in a slower pace of additions to problem loans, leading to more stable impaired loan ratios," Moody's vice president and senior credit officer Srikanth Vadlamani said in a news release.

Vadlamani pointed out that deteriorating asset quality was the key driver of Moody's negative outlook on India's banking system since November 2011.

"However, the recovery in asset quality will be U-shaped rather than V-shaped, because corporate balance sheets remain highly leveraged."

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