In its latest analysis on the banking industry in emerging regions, Moody's Investors Service predicted that the asset quality of banks in Southeast Asian nations and India will remain stable in 2023.
According to the analysis, Indian banks will profit from a stable operating environment and considerable increases in their solvency indicators. According to Moody's, the high inflation and rising interest rates will gradually raise margins, bolstering banks' revenue.
On the other hand, higher debt-servicing costs and slowing economic growth pose asset risks for banks, although they are well positioned to cope with potential growth in problem loans thanks to prudent underwriting standards and ample reserves. Inflation rates will fall but remain high in 2023 while economic slowdown is likely to be moderate, the report notes.
According to Moody's capital inflows support funding and liquidity of the banks in emerging markets. During the first nine months of 2022, capital inflows into India stood at over 2 per cent of its gross domestic product. The credit rating agency also said, the emerging markets face the double whammy of inflation and currency depreciation.
Davos 2023: Raghuram Rajan says Indian banks on aggressive retail bet
