With economic conditions worsening, India’s banking industry has received a downgrade from a leading rating agency. On Wednesday Moody’s Investor Service cut its forecast for the Indian banking sector from “stable” to “negative”. It said lower growth was hurting asset quality and profitability. The agency also added that government borrowing was eating into funds for private borrowers. According to Moody’s, a “negative” outlook means volatility and uncertainty. It says the effects of the slowdown will become apparent over the next one-and-a-half years, and that banks would be forced to hike their provisioning during this fiscal and the next one.
It’s been a bad week for Kingfisher Airlines. On Monday the cash-strapped carrier decided to begin canceling dozens of flights until 19 November. On Tuesday alone, it stopped running 50 flights. These included major routes out of big cities like Mumbai, Delhi and Bangalore. The move was a last-ditch measure to save some money. Kingfisher is already defaulting on payments to oil companies and is falling behind on paying salaries.
By Friday there was a glimmer of hope for the airline with authorities broadly agreeing to a rule change that could throw it a lifeline. Mint has learnt the government has agreed in principle to allow foreign airlines to invest in India’s domestic carriers. The union cabinet is likely to consider the issue in the next four weeks. If it gets the green light, foreign airlines will be able to invest 24% in domestic carriers. Still, shares of Kingfisher nosedived on Friday to finish 9.45% lower on the BSE at 19.65.
The gloomy outlook for India’s economy has become worse. New data shows industrial output has decelerated to its lowest growth in two years. The index of industrial production nudged up a mere 1.9% in September. The revised figure for August is 3.6%.