Dismissing concerns over downgrading of Indian banking system by Moody’s, the government on Tuesday said the rating will have no long lasting effect as the sector’s financial health is sound.
“There is no cause of concern ... the Indian banking sector is in sound financial health and Moody’s ratings would not have a long lasting effect on the banking sector in India,” the Minister of State for Finance, Mr Namo Narain Meena said in a written reply to Rajya Sabha.
Early this month, Moody’s Investor Service had changed its outlook for India’s banking system to ‘negative’ from ‘stable’ citing concerns of high inflation, monetary tightening and rapidly raising interest rates.
The Minister said both the banking sector and the government are aware of challenges and taking all steps to counter the challenges which are primarily coming from outside India.
“The Government of India is committed to keep the banking sector in good health. Therefore, interest of small investor would not be affected in the long run,” Mr Meena said.
Almost all banks are having above 9 per cent Tier-I capital and 11 per cent total capital. RBI requirement is 6 per cent and Basel II requirement is 4 per cent of Tier - I capital.
Besides, over and above Basel II requirement, Indian banks are providing a counter-cyclical buffer up to 70 per cent of the risk weighted assets. The NPAs of Indian banks are in the range of 3-3.5 per cent.