Indian banks will benefit from their conservative underwriting ahead of the pandemic, Moody's Investors Service said in its latest credit outlook report released on Monday.

However, the severe second coronavirus outbreak in India will delay expected asset quality improvements keeping banks' asset risk stable.

Moody's said problem loans to gross loans will remain unchanged in China and increase by 90 basis points in Chile and India. Banks in China and Chile have high problem loans coverage of 184 per cent and 218 per cent respectively.

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Loan performance will diverge widely across emerging markets as some countries struggle with new variants of coronavirus while others rebound. The crisis is proving longer lived than expected in many parts of the emerging world and economic recovery will be uneven across countries and sectors.

Pandemic-induced business disruption will leave many borrowers struggling to keep up with loan repayments, particularly as government and central bank support measures unwind this year.

Moody's said it has identified asset risk trends across 13 of the largest emerging market banking systems.

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