Slowdown may affect banks' asset quality: Mukherjee

Any continued decline in the growth of the India's gross domestic product (GDP) would have disastrous consequences for banks in terms of asset quality and performance, finance minister Pranab Mukherjee said today.

Mukherjee was delivering the inaugural address at a meeting on `Leveraging financial services sector as growth engine for transformation', organised by the Indian Merchants Chamber and the Institute of Chartered Accountants of India in Mumbai today.

He said banks have to find additional resources for meeting capital requirements under Basel III global norms for banks and any slowdown at this juncture will stretch the fiscal woes of banks.

The Indian economy is likely to grow at 7.6 per cent in fiscal 2012-13, up from 6.9 per cent in the 2011-12 fiscal, the lowest rate of GDP growth recorded in nearly a decade (except during the global financial crisis in 2008) he said.

"At the current juncture, there are some new challenges in the banking sector that merits the attention of the policymaker. In the past three years, since 2008, we have seen global turmoil hurting the stability of the financial system. GDP is likely to grow at 6.9 per cent for the year,'' Mukherjee said.

However, he said, ''fiscal deficit is likely to fall from 5.9 per cent to 5.1 per cent in the current fiscal year as announced in budget," he said.