‘Banks face deterioration in corporate debt repayment capacity’

New Delhi, Feb 19 (SocialNews.XYZ) India's banking sector has been marked as one of the most exposed to deterioration in corporate debt repayment capacity, Moody's Investor Service said on Wednesday.

In a sector specific report on credit conditions in Asia, the firm said: "In the banking sector, deterioration in growth dynamics and macroeconomic conditions will inevitably weigh on banks' asset quality through a combination of deteriorating debt repayment capabilities and rising default risks among weaker Asian companies."

"Our stress tests on corporate income shock impact show that India and Indonesia are the countries most exposed to deterioration in corporate debt repayment capacity, followed by Singapore, Malaysia and China."

The report further said that the regional political flashpoints such as the conflict between India and Pakistan has resulted in the rise of policy uncertainty indices of the affected economies to multiyear highs in recent months

In terms of the longer-term demographic challenges, the report said that India, Indonesia and the Philippines, "where the population is much younger, face an equally tough challenge of creating sufficient employment opportunities and adequately preparing its young workforce".

"In India, youth unemployment has been rising alongside falling labour force participation, an indicator of mismatched skills and expectations and low availability of jobs."

According to a 2017 OECD survey, more than 30 per cent of youth ages 15-29 in India are also not employed, in school or enrolled in training, which leaves the country with a significant share of low-skilled workers.

The report added that India suffers from institutional bottlenecks and fiscal challenges, although the country has benefited from a relatively low external debt burden.

Source: IANS