Fitch retains negative outlook for India's banking sector

Fitch re-affirmed its "negative" outlook for India's banking sector, saying the financial standing remained "fragile" without bigger capital injections and that the government's action on banknotes could end up having a mixed impact.

Fitch Ratings said the government's move to remove higher-value banknotes from circulation would lead to a surge in deposits, allowing lenders to eventually lower lending rates and lower costs to service the sector's debt.

But it also noted that the overall impact on the banking sector remained uncertain, given borrowers in sectors that rely on cash could struggle to service their loans, while deposits could eventually be withdrawn again, among other factors.