Indian banking system may have stuttered in past few months, but on Monday, Moody’s Investors Service said that the outlook of Indian banks is getting stable and will continue to grow in upcoming 12-18 months.

Moody’s has cited that since the economic growth prospects in India are remaining to be constant and healthy, hence, Indian banking system outlook is likely to remain stabilised despite weak asset quality. The America-based international credit rating agency has also said that the stable outlook of Indian banking sector will continue for next 12 to 18 months. Moody’s has derived the outlook based on six parameters like – operating environment, asset quality, capital, funding and liquidity, profitability and efficiency, and government support; and all these are fulfilled by the current Indian economy status.

The stability in banks and economy will bring investment growth and strong consumption in the domestic market, and hence, the overall gross domestic product (GDP) of India will grow to 7.2 per cent in the year ending March 2019 and 7.4 per cent by the end of 2020 – says Moody’s. However, the agency also believes that factors like liquidity limitations on non-bank finance institutions and rising interest rates for loans could hurt the credit for the economy and drag down the overall growth rate of the country.

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