A recent report from the S&P said that the Indian banking sector is likely to face pressure on margins in the current fiscal, in spite of the expectations in the improvement of asset quality will improve, said Standard & Poor’s Rating Services.
The average gross non-performing loan of Indian banks are expected to improve from 2.6 per cent in 2010-11 to 2.4 per cent in 2011-12.
She said that most of the restructured assets have already slipped into NPLs and further slippages are doubtful to be very important.
She added saying that bank margins are likely to see a compression of 25-50 basis points predominantly due to rising funding costs. The banks are unlikely to pass on the entire costs to customers because of the powerful competition.
Reports said that the government is likely to infuse more capital into public sector banks because the public sector banks are under pressure regarding capital issues where as private banks are well capitalized.