Banks facing structural issues: Fitch Ratings

Chennai: The operating environment (OE) for Indian banks has strengthened as economic risks associated with the Covid-19 pandemic have ebbed, Fitch Ratings said in a report on Wednesday.

Fitch also said other structural issues like lengthy legal process, bad bank not playing a meaningful role hamper the OE. While the number of prudential indicators for the sector has also improved compared with pre-pandemic levels, though growing risk appetite in a relatively benign OE highlights the importance of appropriate buffers against potential stress, the credit rating agency added.

Fitch revised its OE mid-point score for Indian banks to ‘bb’ from ‘bb+’ in March 2020, after assessing that the pandemic was likely to worsen the existing OE stresses facing the sector. According to Fitch, India was badly affected by the pandemic, but the associated risks have now receded.