Credit rating agency Moody's Investors Service has classified India's average bank financial strength rating as "very weak". According to Moody's, India's financial system ranks 60th among the 73 countries that were ranked.
The countries worse off than India included Malaysia, China, Mexico, Thailand, Pakistan, Indonesia and Russia. The rating scale ranges from grade `A' to `E' and India is in the `E plus' slot. Not even a single country was rated `A'.
The `B' financial strength rating indicates strong intrinsic financial strength, `C' good strength, `D' adequate strength and `E' very weak.
The country with the strongest financial strength rating was the Netherlands at `B', followed by Switzerland. The US came in ninth.
The average bank financial strength ratings by country indicate the susceptibility of a financial system to collapse. A `very weak' rating for India is an ominous sign.
The Indian financial system is currently plagued by a high level of non-performing assets. The feeling in the market is that the non-performing assets of many of the financial institutions are much higher than the published figures, with several FIs advancing fresh funds to clients to pay off sticky loans.
The rating of the Indian financial system also reflects the general global scenario. Moody's has downgraded several banks and financial institutions globally. As a result, the average bank financial strength has weakened across several countries, particularly the Southeast Asian nations.
