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May 29, 2026
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Indian banks highly exposed to oil shock, RBI may face pressure to raise rates: Moody’s
Indian banks are among the most exposed lenders in the Asia-Pacific region, according to a report by Moody’s. This is due to the country’s heavy dependence on energy imports from West Asia. The disruption around the Strait of Hormuz is pushing oil prices higher and increasing inflationary pressures, raising interest rates and weakening borrowers’ repayment capacity in India.
“Indian banks are among the more exposed in the region, given the economy’s high dependence on energy imports from the Middle East and the consequent pressure on inflation, interest rates and borrower cash flows,” Moody’s said in the report according to PTI.
“Our new central scenario reflects a sustained Strait of Hormuz disruption through the third quarter of 2026, with oil prices averaging $90- 110 per barrel during much of the year,” Moody’s said according to PTI.
Moody expects financial conditions to remain relatively tight across energy-importing economies. Lower economic growth, higher rates and inflation in some markets, and local currency pressures will negatively impact APAC banks’ loan quality and profitability, it noted.
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