Indian banking on "high-growth trajectory": S&P

Mumbai: Despite the challenges of high domestic inflation, intense competition, and evolving risk management processes, growth in India's banking sector will remain high, bolstered by sound economic growth prospects.

According to an industry report, titled, The Indian Banking Industry Is Resilient And Buoyed By Strong Economic Growth Prospects, published by Standard & Poor's Ratings Services today.

"A robust economy, along with a stable retail deposit base and a prudent regulatory environment, has underpinned the resilience of India's banking sector to the global financial slowdown," said Standard & Poor's credit analyst Geeta Chugh. "We expect credit growth of about 20 per cent in the next fiscal year."

According to S&P's banking report performance, the asset quality of the Indian banking sector came under some pressure in the fiscal year ended 31 March 2010. Moreover, non-performing loans increased moderately from their historical lows, with the gross NPLs for S&P's portfolio of rated Indian banks rising to 2.5 per cent as of 31 March 2010, up from from 2.2 per cent a year ago.

"This was in line with our expectation," notes the report.

However, the increase in NPLs was contained by the quick economic recovery, modest leverage, low sectoral concentration in the banks' loan books, and low exposure to sensitive sectors.