With deceleration in growth and tight liquidity conditions, the country's financial institution sector may continue to face challenging operating environment, according to a report by Fitch Ratings.
It said the stress in non-banking financial companies, small and medium enterprises (SMEs) and the real estate sector will continue to put asset-quality pressures on financial institutions in the country.
"The Indian financial institutions (FIs) sector will continue to face a difficult operating environment amid the macroeconomic slowdown and weak funding conditions," the rating agency said in a note on Wednesday.
The rating agency expects the real GDP growth to slow to 4.6 per cent in 2019-20 from 6.8 per cent in 2018-19, led by a squeeze in credit availability from non-banking financial institutions (NBFIs) and deterioration in business and consumer confidence.
However, the real GDP growth may rebound to 5.6 per cent in 2020-21, it said.
The report said asset-quality tensions are likely .
