Covid-19 pandemic impact will pose challenge to Indian banks in FY22: Fitch

Indian banks, particularly state banks, remained more risk-averse than in prior years, which was reflected in their weak credit growth

The improving financial performance of Indian commercial banks will face a challenge from the impact of Covid-19 pandemic once asset-quality risks manifest in the next financial year (FY22), according to Fitch Ratings.

Indian banks reported lower impaired loans and improved profitability for the nine months ended December 2020 (FY21) due to various forbearance measures and continued large write-offs.

The disproportionate shock to India's informal economy and small businesses, coupled with high unemployment and declining private consumption have yet to fully manifest on bank balance sheets, the rating agency said in a statement.

Indian banks, particularly state banks, remained more risk-averse than in prior