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Moody's Investors Service in a statement said, "Its outlook on the Indian banking system for the next 12-18 months remains negative -- as it has been since November 2011 --reflecting the continued challenging nature of its domestic operating environment".
Moody's rates a total of 15 public sector and private sector banks, which together accounted for about 66 per cent of the banking system's estimated total assets on March 2012.
The gross NPAs or bad loans of all public sector banks taken together has increased to 4.01 per cent in the second quarter of the fiscal from 3.06 per cent in the year ago period.
As per the agency, banks' average standalone credit strength is D+, or ba1 on the long-term rating scale, whereas their average foreign currency long-term deposit rating is Baa3, which is investment grade.
Moody's said India's environment is characterised by slow economic growth, high inflation, high interest rates, and a weak local currency.
". . .we expect these factors to lead to a further
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