India hints Moody8217;s downgrade wrong?

He was reacting to rating agency Moody8217;s lowering the outlook of the Indian banking system to 8220;negative8221; from 8220;stable8221;.

A 8220;negative8221; outlook is characterised by volatility and uncertain conditions.

Moody8217;s said that slow growth,both in domestic and foreign economies,is putting stress on banks8217; asset quality,capitalisation and profitability.

8220;I don8217;t see any reason for the downgrade. Our banks are fully capitalised and the government will continue to capitalise it,8221; Mittal added.

As regards bad loans of Indian banks,Mittal said,8221;Our NPAs are better compared to other global banks. Indian economy is growing at eight per cent,so the stress that Moody8217;s has pointed out,is more outside India than within. We are growing better and our credit growth will also be good.8221;

Yesterday,Reserve Bank Deputy Governor Subir Gokarn had also said that the non-performing assets NPAs of banks are not posing any threat to the banking system.

However,in today8217;s report Moody8217;s said,8221;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 FY8217;12 and FY8217;13.8221;

Following the ratings downgrade,the BSE banking index declined over 2 per cent to 11,082 points at 1444 hrs.