New Delhi: The Covid-19 pandemic will lead to a deterioration in asset quality for Indian lenders, global ratings agency Standard & Poor’s (S&P) said on Friday, cutting its outlook on private sector lenders Axis Bank and ICICI Bank to “negative”.
The agency said the economic recovery will be U-shaped, the risks for the banking sector remain on the downside and also warned of some rating downgrades because of the pandemic.
It can be noted that since late 2014, with the asset quality review, the going has been difficult for the Indian banks which are now saddled with toxic debt of nearly Rs 10 lakh crore. Slower economic growth in the days leading to the outbreak was making a recovery difficult.
“We expect Indian banks’ asset quality to deteriorate, credit costs to rise, and profitability to decline,” the agency said in a note.
The agency added that it has revised the economic risk trend for the banking system to negative from stable earlier.
The outlooks on both Axis Bank and ICICI Bank have also been revised down to “negative” largely due to the impact of the economic headwinds that they will be facing, but spared their peers like largest private sector lender HDFC Bank and Kotak Mahindra Bank.
Ratings on both Axis Bank and ICICI Bank have been affirmed at the existing ones.
