Downgarding banking system

1

·         Moody downgraded rating for entire indianbanking sector from stable to negative

REASONS

·         Concern over weakening loan quality

·         High inflation

·         Rising interest rates-> falling interest margins

·         Positives of indina banks

o   Adequately capitalised

o   Better regulated

Impact of downgrade

·         Cost of borrowing from overseas increases

Defects of rating process

·         Don’t capture the strengths and weakness of government ownership of most of indian banks