S&P: Indian banking system will be among last to recover from crisis

However, the banking systems of India, Mexico, and South Africa will be slower to recover to 2019 levels likely beyond 2023, the global rating agency said.

The path to recovery will be more painful for emerging markets such as India. The banks’ recovery to long-term averages for key asset quality and profitability ratios will take years, it said.

"We have already negatively revised the economic or industry trends underpinning the financial strength of many banking jurisdictions globally. This trend should persist. Further, we have seen negative rating momentum affecting financial institutions in most major banking jurisdictions, indicating that downside risks are to the fore," the S&P Global report said.

Even for less-affected banking jurisdictions, recovery to pre-COVID-19 levels will unlikely come before end-2022, it added.

Further, emerging market banks will likely see a sharp increase in credit losses in 2020. There is potential for a gradual improvement in the following years if economic activity rebounds.

"Given the banks' relatively strong profitability, we see some cushion to absorb the anticipated weak performance in the loan portfolio," it added.

The rating agency anticipates there will be much uncertainty on the recovery pathway. Banking sector recovery will not just depend on the economic recovery occurring broadly in, but also on the nature and extent of the economic damage affecting firms and households prior to the onset of the economic recovery, and the extent to which this will hit banks.

Already, it has forecast credit losses of about $2.1 trillion for 2020 and 2021 for the global banking sector, spurred by the pandemic.