New Delhi: Indian banks need an additional $7 billion (Rs 50,000 crore) equity by 2020-21 to support loan growth and cover for bad loans, Fitch Ratings said, adding a slowing economy could exacerbate asset-quality tension for a sector grappling with weak recoveries and ageing provisions.
In its 2020 Outlook for 'Asia-Pacific Emerging Market Banks', the rating agency maintained a negative outlook on Indian banks, based on its expectations of continued weak performance despite trends showing this could be past the trough, and ongoing capital requirements.
"Non-bank stress coupled with rising macro headwinds pose further challenges for asset quality, particularly at state banks which continue to experience capital constraints, delays in bad-loan recoveries, and poor earnings. More capital is needed to insulate the banks' weak balance sheets and to sustain loan growth," it said.
Fitch said the rating outlook for most Indian banks mirrors the stable outlook on India's sovereign rating.
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