New Delhi, Dec 9 (IANS) Global rating agency Moody's on Monday said pressure on Indian finance companies continues to build up, with some banks heavily exposed to non-bank credit providers, hinting that India's NBFC crisis is far from over, even after a year since the troubles began when a major shadow bank IL&FS Group abruptly defaulted.
"Most Asia Pacific (APAC) banks have passed Moody's stress test on capital, except the banks in India, Mongolia, Sri Lanka and Vietnam, because banks in these jurisdictions have lower starting capital ratios and higher starting problem loan ratios," the rating company said.
Moody's Investors Service's outlook for the banking industry in Asia Pacific is negative over the next 12 months, because owing to the US-China trade dispute, which will weaken economic and trade activity in the region, and erode investor confidence.
"Weaker economic and trade conditions will lead to moderate increases in problem loans for APAC banks," said Eugene Tarzimanov, Moody's Vice President and Senior Credit Officer.
"Meanwhile, the banks' profitability will fall, because they are raising credit provisions while central banks are cutting interest rates to support economic growth," said Tarzimanov.
Nevertheless, Moody's said that APAC banks have generally maintained good capital and liquidity buffers and the probability of government support for these banks will stay high, except for the banks in Hong Kong, because the territory is the only jurisdiction in APAC with an operational resolution regime.
With recurring NBFC fiascos such as the IL&FS and the recent case of DHFL, the government has asked the Reserve Bank of India to consider several proposals to de-stress the NBFC sector, including the creation of a special fund by the central bank to buy out stressed assets of the top NBFCs.
Sources said the discussions are going on, although the central bank is not very keen on moving forward. The fund being mulled is in line with the 2008 Troubled Asset Relief Programme (TARP) of the US, under which the government purchased toxic assets and equity from financial institutions to strengthen its financial sector.
Mumbai, Jan 27 (IANS) The key Indian equities declined on Wednesday morning with the BSE Sensex losing nearly 400 points, coming down from the 48,000-mark.
Heavy selling was witnessed in banking, finance and oil and gas stocks.
Around 10.25 a.m., Sensex was at 47,954.05, lower by 393.54 points or 0.81 per cent from its previous close of 48,347.59.
It opened at 48,385.28 and has so far recorded an intra-day high of 48,387.25 and a low of 47,939.97.
The Nifty50 on the National Stock Exchange was trading at 14,147.05, lower by 91.85 points or 0.65 per cent from its previous close.
Manish Hathiramani, technical analyst with Deen Dayal Investments said: "14,250 was a medium-term support for the index which was pierced on Monday. This makes the Nifty vulnerable and we can go down to 13,950 as a possible target."
"If we are unable to hold that level, we could fall further to 13,600. On the upside, the resistance is at 14,550-14,600 and until we do not close above that zone, we will continue to remain in the grip of the bears," he said.