Global rating agency Fitch today said the credit profile of the Indian banking sector has improved in the recent years, but a great deal still needs to be done on disclosures."The credit profile of the Indian banking sector has improved during the last two to three years, helped by investment in risk management systems and a benign credit cycle," Fitch said in a report.The financial health of Indian banks strengthened even as the Reserve Bank gradually tightened the prudential norms.However, Fitch noted that despite recent progress on disclosures by Indian banks, a lot more still remains to be done in this regard.Fitch observed that notable changes include increased general provisions on certain retail loan categories, increased risk weight on real estate exposures, permitting banks to issue hybrid capital and shifting to a 90-day norm from 180-day for recognition of non-performing loans.The rapid loan growth as well as the proposed capital change for operational risk under Basel II and tightening risk weights on various loan categories has increased the banks' need for capital, it said.Basel II capital norms will be applicable from financial year 2007-08 and banks are required to adopt the standardised approach for credit risk and the basic indicator approach for operational risk.Fitch said disclosures concerning loss on reconstructed assets, modified duration of the investment portfolio, sensitivity of various advances and investments to change in interest rate, breakup of outstanding provisions and credit exposure to the various sectors would be useful.
