The Chennai-based public sector lender is expected to benefit from
faster-than-expected economic recovery in India
Rating agency Standard
and Poor’s (S&P) has affirmed ratings for Indian Bank at “BBB-” on
expectation of ability to absorb a moderate deterioration in its asset quality
over the next 12 months.
The Chennai-based public sector lender is expected to benefit from
faster-than-expected economic recovery in India.
Rating agency
removed the ratings from CreditWatch,
where they were placed with negative implications on June 26, 2020. Another
public sector lender Allahabad Bank was merged with Indian Bank on April 01,
2020.
Outlook on
financial instrument is negative due to asset quality and capital risks. It
reflects the view that the bank's capital and asset quality could deteriorate
due to the Covid-19 fallout over the next 12-18 months.
Chennai-based
bank's risk-adjusted capital (RAC) ratio could fall below five per cent on a
sustained basis in the absence of external capital infusion, rating agency
said. Its capital adequacy ratio stood at 13.64 per cent in September 2020.
“Non-performing
loans (NPLs) in India's banking sector could rise to 10-11 per cent by
end-March 2022 (fiscal 2022), from about 8% as of June 30, 2020. We also
forecast that an additional 3-8 per cent of loans could get restructured”,
S&P said.
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