The Indian banking sector, reeling under asset quality pressures, will continue to see difficult times in 2014 due to the weak macro environment, rating agency Fitch has said.
The rating outlook for Indian banks remains stable, driven by the revision in the sovereign outlook. Viability rating pressures remain, owing to weak asset quality and eroding profits.
This had hit the standalone credit profiles of various public sector banks, leading to their recent VR downgrades, Fitch said in its outlook for the banking sector next year.
The full impact of the protracted slowdown remained to be seen, Fitch said, adding it had scaled down India’s economic growth forecast for 2013-14 to 4.8 per cent (from 5.7 per cent).
The 2014-15 forecast of 5.8 per cent could mean a revival, albeit at a slow pace.
Fitch said the high inflation and interest rates were likely to lead to a rise in non-performing