InvestorQ : Is it true that the outlook for Indian PSU banks has been upgraded by the rating agencies?
Katherine Gonsalves made post

Is it true that the outlook for Indian PSU banks has been upgraded by the rating agencies?

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rhea Babu answered.
2 days ago
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Let me clarify on two points here. Firstly, it is not all the rating agencies but only India Ratings & Research has upgraded the outlook for banks. Secondly, this is not an upgrade of the entire banking sector but only of PSU banks. While PSU banks have been upgraded from Negative to Stable, private sector banks continue to remain at their previous rating of Stable. For private banks it is more of a status quo.

Despite this upgrade, the rating agency has clarified that it does expect higher levels of stress in retail loans. The last 9 months had given most of the banks the opportunity to beef up their provisions and make adequate provisions for the pandemic related risks. India Ratings expects that the provisions would be up by 80% on these specific stressed retail NPAs in the coming financial year FY22.

India Ratings has also revised its credit growth estimates for FY21 from 1.8% to 6.9%, which is a substantial upgrade. In addition, it has also upgraded its forecast for credit growth in FY22 to a healthy 8.9%. The rating agency has pointed out that most of the retail stress in FY22 would come from unsecured advances given out by private banks and hence PSU banks would be relatively better off. That justified the upgrade of PSU Banks.

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