Banking stocks have slipped in trade today after the rating agency downgraded the outlook for the Indian banking system. Track BANKEX and its key components here.


Banking shares have come under pressure on the bourses today after Moody's Investor Service downgraded its outlook for India's banking system to "negative" from "stable", as it warned of slowing growth at home and overseas hitting asset quality, capitalisation and profitability.

The Bank Nifty is down more than 1% or 110 points, compared to 0.18% or 9 points fall in the benchmark index S&P CNX Nifty.

Among the individual stocks, India’s largest public sector bank, State Bank of India is the major loser, down 5% after its gross non-performing assets (NPAs) increased to 4.19% as on September 30, 2011 from 3.35% in a year ago period. Net NPAs rose to 2.04% from 1.70% during the same period.

Bank of Baroda, Federal Bank, UCO Bank, Allahabad Bank and ING Vysya Bank are down by 2% each.

 “A curbing of economic growth and increased borrowing by the government will drain funds from the private credit market, the ratings agency said in a statement, pressuring lenders in India," a Reuters report suggests.

With asset quality, given the tightening environment, we anticipate that it will deteriorate over the next 12-18 months, thereby causing an increase in provisioning needs for the banks in FY2012 and FY2013, a report suggests, quoting Vineet Gupta, Moody's vice-president and senior analyst.

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