Moody's Investors Service has upgraded its outlook for India's banking system to 'stable' from 'negative' on expectation that a gradual improvement in the operating environment for lenders will lead to lesser growth in bad loans in future. Moody's had assigned a negative outlook to the Indian banking system in November 2011 as it was of the view that the asset quality of the lenders was deteriorating.In the report Moody's said the stable outlook is based on assessment of five drivers — improving operating environment, stable asset risk and capital, stable funding and liquidity.Moody's, however, said the capital levels of public sector (PSU) banks are low and the government's announcement of injecting Rs 70,000 crore into PSU banks over the next four years is "clear positive".Moody's rates 15 banks in India that together account for around 70 per cent of system assets. Four are private-sector banks and the remaining 11 are PSU banks.