There is increasing repayment pressure on some borrowers, especially micro, small and medium-sized enterprises India‘Rise in interest rates will test the quality of credit underwriting of banks’ Fitch Ratings said on Thursday.

However, asset-quality risk from higher rates should generally be moderate for most banks, it said in a statement.

Higher rates will also affect the valuation of securities and may make it difficult for banks to raise fresh capital, especially in state banks, though wide net interest margins (NIM), it added.

reserve Bank of India ,reserve Bank of India) raised policy interest rates by 50 bps to 4.90 per cent in June.

“We expect rates to rise further, reaching 5.90 per cent by the end of 2022 and 6.15 per cent by the end of 2023, then remain at this level until 2024,” added the banks to higher rates through the loan portfolio. Hastened to pass. , which are mainly floating in nature but have been slow to raise deposit rates.

This trend should support higher NIMs, but the lack of competition for deposits could point to relatively low demand for new loans, it said.

“We expect banks’ capital buffers to remain in line with the current ratings in the near term, although weak capitalization will put a greater constraint on credit growth in state banks than private sector rivals.

“Higher interest rates may make accessing additional private capital more challenging, making state banks more dependent on equity injections from the government, if they maintain market share,” it said.