Credit rating agency, S&P Global Ratings in its latest report ‘Global Bank Country-By-Country Outlook 2023: Greater Divergence Ahead’ has showed that polarization in the performance of Indian banks may persist in 2023 as many large public-sector banks are still saddled with weak assets, high credit costs, and poor earnings. Similarly, the agency expects a mixed-bag performance for finance companies (fincos). It said the asset quality of these fincos is often weaker than that of major private-sector banks.
The report further noted that real Gross domestic product (GDP) growth is likely to moderate as monetary conditions tighten and consumers grapple with higher inflation. However, India's economic growth prospects are likely to remain strong over the medium term, with GDP expanding 6.5%-7% annually in fiscal years 2024-2026.
As per S&P Global Ratings, global uncertainties to have lower impact on the economy. Slower global growth and external demand will weigh on economic activity and could fuel further inflation. However, given that India is domestically oriented, the agency expects the economic growth to be less affected. Moreover, it assumes the impact on the banking sector will also be modest.
