MUMBAI, March 28 (Xinhua) -- Indian banks' recovery pace is likely to remain tepid on slow resolution of non-performing loans (NPL) and weak capital, the international rating agency Fitch said on Thursday.
The projection was made despite improvement in NPL ratio in the first nine months of the current financial year ending March 2019.
Lower fresh slippages and better recoveries were instrumental in driving down the Indian banking sector's gross NPL ratio to 10.8 percent in April-December 2018 from 11.5 percent over the corresponding period in the preceding year, Fitch said.
Thin capital buffers remain at risk from aging provisions of the Indian banking sector, particularly state-owned banks, which stem from the slow resolution of the sector's 150 billion U.S. dollars worth of NPL stock in 2017-18.
The government's recent decision to recapitalize banks by an additional 7 billion U.S. dollars in 2018-19 provides banks with near-term reprieve but may not be enough to support growth, considering ongoing provisioning and their weak earnings outlook.
