Downgrade unjustified, Indian banking sector stable: Bankers

Bankers today criticised Moody's downgrading of Indian banking sector saying it was unjustified and unwarranted. Moody's has said that slow growth, both in domestic and foreign economies, is putting stress on banks' asset quality, capitalisation and profitability.

Bankers on Wednesday criticised Moody's downgrading of Indian banking sector saying it was unjustified and unwarranted.

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"Indian banking system is not at risk. The downgrade is not justified at this point of time because it is premature," HDFC Chairman Deepak Parekh told reporters in Mumbai.

He was responding to the decision of the US based ratings firm Moody's to lower the outlook of the Indian banking system to "negative" from "stable".

A "negative" outlook reflects volatility and uncertain conditions and would increase the cost of borrowing in overseas markets.

"The Indian banking system does not warrant a downgrade in outlook. There is nothing happening as such to change the outlook," Punjab National Bank CMD K R Kamath said.

He said the 18% credit growth projection for the current fiscal is quite healthy for the Indian banking system.

Moody's has said that slow growth, both in domestic and foreign economies, is putting stress on banks' asset quality, capitalisation and profitability.

Critical of the decision of Moody's, State Bank of India (SBI) CMD Pratip Chaudhuri said state of Indian banks is much better as compared to global lenders.

According to Parekh, "there are concerns related to restructured loans, but restructured loans as a percentage is not alarming. Profitability of Indian banks is still robust."

Non-performing assets of state-owned banks have increased to 2.31% of their assets at the end of March 2011, from 2.27% in the year-ago period.

As at the end of September quarter, the Gross NPA of country's largest lender SBI stood at 4.19%, higher than 3.38% in the year-ago period.