Indian banks' asset metrics to remain weak in the next 12-18 months

It will reflect the system's credit binge in 2009-12.

It can be recalled that during the 2009-12 period, investment plans of corporates rose significantly. This situation is also reflected in Axis Bank's watchlist of stressed corporate loans, with 80% coming from loans originated during this period, says Moody's.

"We expect the pace of formation for new impaired loans to be significantly lower compared to the previous 18 months. We believe that a significant portion of the legacy issues in the banks' loan vintages for 2009-12 has already seasoned, given that they have already experienced five years of high impaired loan formation rates. The system's loan recognition efforts is reflected in the high impaired loan ratios for key stressed sectors," Moody's adds.

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