Indian Banks To Maintain Stable Asset Quality Despite Global Uncertainty: Moodys
Mumbai: Global rating agency Moody's said that Indian banks are well-positioned to maintain stable asset quality over the next 12 months, even as global trade tensions create uncertainty for the world economy.
According to Moody's, domestic economic conditions remain supportive of growth, helping Indian banks manage their loan books effectively. The agency expects the non-performing loan (NPL) ratio to stay between 2 to 3 per cent over the next year.
As of December 2024, the NPL ratio stood at 2.5 per cent -- reflecting strong asset quality in the sector. This positive outlook comes at a time when investor interest in banking stocks remains high. On Tuesday, the Nifty Bank index hit a record high of 56,161.40, driven by optimism ahead of the Reserve Bank of India's Monetary Policy Committee (MPC) meeting this week.
Investors are hopeful of a potential interest rate cut, which could further support credit growth and ease borrowing costs. The RBI, under Governor Sanjay Malhotra, has already cut the repo rate twice this year -- from 6.5 per cent to 6 per cent -- and analysts expect another 25 basis point reduction in the upcoming policy.
Although the Nifty Bank index pulled back slightly in mid-morning trade, slipping 0.1 per cent due to profit-booking in heavyweight stocks like ICICI Bank, Axis Bank, and Kotak Mahindra Bank, smaller banks such as AU Small Finance Bank, Federal Bank, PNB, HDFC Bank, and IndusInd Bank saw modest gains of 0.4 to 1.2 per cent.
Despite the brief dip, Nifty Bank remains one of the top-performing indices in 2025, having risen 10 per cent year-to-date and 15 per cent from its 52-week low. Over the last 12 months, it has delivered a return of 9.7 per cent -- reflecting strong investor confidence in India's banking sector. Adding to the positive sentiment, India's GDP grew by 7.4 per cent in the March quarter (Q4) of FY25, with an overall annual growth rate of 6.5 per cent.
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