Banks' asset-quality risk to be moderate after RBI rate hike: Fitch Ratings

Indian banks will weather the near-term pressure of rate hikes but their loan underwriting quality will be tested, said Fitch Ratings on Thursday.

The asset-quality risk from higher rates should generally be moderate for most banks. “Mounting repayment pressure for some borrowers amid India’s interest rate hikes, particularly for micro, small and medium-sized enterprises, will test banks’ loan underwriting quality," said the agency.

“Generally, asset-quality risks from the rate hikes should be manageable for most banks. Aggregate corporate leverage has fallen back in recent years and India has a low level of household debt/nominal GDP, at 14.5% in 2021. Nonetheless,