moody’s

The rating agency said there was increasing probability that actions by policy makers will enhance the country’s economic strength and by extension, the sovereign’s financial strength over coming years. The rating incorporates credit strengths such as diversified economy, robust growth prospects, relatively high domestic savings rate, high international reserve buffers. It also reflects India’s weaker performance relative to peers on fiscal, inflation and infrastructure related metrics. “While policies are beginning to address each of these factors, the extent of likely improvement is as yet unclear,” said the Moody’s release, adding that India’s banking system’s asset quality, loan loss coverage and capital ratios were relatively weak “This poses sovereign credit risks because of banking sector’s role in financing growth as well the government’s deficit through its purchase of government securities and the contingent liabilities due to government’s ownership of a major portion of banking sector,” the release said.