S&P says credit risks of Indian banks manageable

Standard & Poor's Ratings Services expects credit risks for banks that it rates in India to be manageable.

According to an report, Unraveling The Credit Risks At Indian Banks, published today, S&P credit analyst Geeta Chugh, says, "We don't expect credit risks to soar among India banks over the next few years at least as their loans books remain weighted toward moderate- and low-risk industries. We believe concentration risk is containable and that the banks' overall leverage is still lower than regional peers'."

S&P says it assessed the creditworthiness of sectors to which Indian banks lend, based on a combination of the rating agency's view of the business and financial risks of companies in them.

The rating agency also said that it expects these banks to contain exposure to high-risk sectors to less than 20 per cent of their loan books over the next five years.

It has projected bank exposure to medium-risk segments like infrastructure to increase to 65 per cent-70 per cent, while low-risk sectors like residential mortgages may account for 15 per cent-20 per cent of loan books.

Despite the rapid growth in loan disbursals in the past decade, the asset quality of Indian banks has improved, the report said.