In a report, the global rating agency Fitch Ratings said the challenges for the banking sector posed by the covid pandemic have increased due to a virulent second wave in the first quarter of the financial year ending March 2022 (FY22).

Fitch Ratings has cut India's growth forecast to 10 percent for the current fiscal, from 12.8 percent estimated earlier, due to slowing recovery post-second wave of COVID-19, and said rapid vaccination could support a sustainable revival in business and consumer confidence.

"Fitch Ratings revised down India's real GDP for FY22 by 280bp to 10 percent, underlining our belief that renewed restrictions have slowed recovery efforts and left banks with a moderately worse outlook for business and revenue generation in FY22," it said. Fitch believes that rapid vaccination could support a sustainable revival in business and consumer confidence; however, without it, economic recovery would remain vulnerable to further waves and lockdowns. It said localised lockdowns during the second wave kept economic activity from stalling to levels similar to those during 2020, but disruption in several key business centres has slowed the recovery and dented Fitch's expectations of a rebound to pre-pandemic levels by FY22. India's economy contracted 24.4 percent in June quarter of 2020.

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