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Moody's warns of SME loan deterioration
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SME Times News Bureau | 04 Jun, 2020
Days after downgrading India's sovereign ratings, global credit ratings
agency Moody's Investors Service said on Wednesday that the quality of
retail and SME loans will also deteriorate.
Elaborating on the key drivers behind India's sovereign downgrade, it said that the risks to the financial system are rising.
Some
sectors were already under strain before the coronavirus outbreak. For
NBFIs, both assets and liabilities will come under a strain in the near
term, this is about 10-15 per cent of bank loans.
Private power
sector exposure is about 8-10 per cent of bank loans. In the auto value
chain, the most exposed banks are the private sector banks.
It said that now the quality of retail and SME loans will also deteriorate, which account of 44 per cent of the total loans.
Moody's
Investors Service has said that policymaking institutions face
increasing challenges from lower growth, weaker fiscal conditions and
rising financial sector stress.
It said that the risks to the
financial system are rising. "Our rating action signals downward
pressure on the ratings and standalone assessments of most rated banks,"
it said.
"Over 80 per cent of rated non-financial companies have
negative outlooks or are under review for downgrade. Two-thirds of the
rated infrastructure portfolio has a negative bias," it said.
The
agency pointed out that India's debt burden remains high as compared to
its peers and the deficits have fallen short of FRBM targets.
The
slowdown in India was evident before the coronavirus outbreak, it said,
as factors were evolving before the pandemic and the risks were rising
since November 2019.
The mutually reinforcing risks from weak
economy and strained financial system are driving downside risks.
Increasing challenges for policymaking institutions, it has flagged as
slower reform momentum hinders effective implementation, pointing to the
drivers of the rating action. There has been a prolonged period of
slower growth, Moody's said.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
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87.50
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84.65 |
Euro
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78.25
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75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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