Indian sovereign, Financial Institutions in 2022 stages explained financial institutions face an uneven recovery due to lingering asset quality risks and capital limitations.
Fitch projects India’s real gross domestic products growth at a robust 8.4 % in 2021to22, 10.3%in next fiscal year as the economy rebounds from its sharp pandemic induced slowdown in 2020to21.
Fitch Ratings that the economy is rapidly recovering from the pandemic but uncertainties remain around its medium-term debt trajectory.
In its report Investors Want to Know Indian Sovereign and Financial Institutions in 2022 it said financial institutions face an uneven recovery due to lingering asset-quality risks and capital limitations.
The medium-term debt, trajectory remains core to our sovereign assessment, fiscal consolidation may be slower than we previously expected based on the February 1, 2022 budget explained that Fitch.
The risks around the sustainability of India’s downward debt trajectory were a key factor for maintaining the negative outlook when Fitch affirmed the ‘BBB sovereign rating in November 2021.
India’s economy has rapidly recovered from the COVID-19 pandemic, the financial sector pressure appears to be easing.
Uncertainties remain around its medium-term debt trajectory, while financial institutions face an uneven recovery due to lingering asset-quality risks and capital limitations also it is added.
The rating agency said banks’ and non-bank financial institutions’ performance should improve gradually amid the economic momentum and extended regulatory forbearance.
Still, lingering asset-quality strains and higher funding costs are likely to weigh on earnings recovery, while state banks’ weaker profitability and capitalization than that of private banks may constrain the capacity for growth, in the remain a drag on banking-sector performance.
The risks around the sustainability of India’s downward debt trajectory were a key factor for maintaining the negative outlook when Fitch affirmed the ‘BBB’ sovereign rating in November 2021.
India’s economy is to be rapidly recovering from the COVID-19 pandemic, financial sector pressure appears to be easing that is his opinion.
Remain uncertainties around its medium-term debt trajectory and the financial institutions face an uneven recovery due to lingering asset-quality risks and capital limitations.
The rating agency said banks and non-bank financial institutions’ performance should improve gradually amid the economic momentum and extended regulatory forbearance.
Lingering asset quality strains and higher funding costs are likely to weigh on nbfis’ earnings recovery that state banks’ weaker profitability.
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