In a significant development for India’s financial sector, S&P Global Ratings has upgraded as many as 10 Indian financial institutions, following its landmark decision to raise the country’s sovereign credit rating for the first time in 18 years. The move underscores international confidence in India’s strong economic fundamentals and robust financial system.
The global rating agency has upgraded the long-term issuer credit ratings on seven leading Indian banks and three non-banking finance companies (NBFCs). According to S&P, these upgrades reflect the stability, resilience, and improving credit culture within India’s financial ecosystem.
S&P Global Ratings: Driving Forces Behind the Upgrade
S&P noted that India’s sound macroeconomic foundation is expected to support growth momentum over the next two to three years. The agency highlighted that monetary policy settings have become more effective in anchoring inflation expectations, while structural reforms such as the Insolvency and Bankruptcy Code (IBC) have strengthened the repayment culture and rule of law in the lending environment.
“The IBC has not only tilted the balance in favour of creditors but also reduced the average resolution time for stressed assets from six to eight years to under two years. Recovery values have doubled to over 30% from just 15–20% under the previous framework,” S&P said in its statement on August 15.
Sovereign Rating Upgrade – A Historic Move
Earlier this week, S&P upgraded India’s sovereign rating to ‘BBB/Stable/A-2’ from ‘BBB-/Positive/A-3’, marking the nation’s first upgrade in nearly two decades. This reflects strong GDP performance, stable inflation, and fiscal consolidation efforts.
India’s real GDP growth averaged 8.8% between FY2022 and FY2024, the highest in the Asia-Pacific region, and is projected to maintain a healthy 6.8% annual growth over the next three years. This growth trajectory is expected to fuel demand for banking and financial services, further strengthening the balance sheets of Indian lenders.
S&P Global Ratings: Positive Outlook for Banks and NBFCs
S&P expects Indian banks to maintain adequate asset quality, profitability, and capitalisation despite sector-specific stress. With rising credit demand, improved governance, and healthier balance sheets, the upgraded financial institutions are likely to enjoy easier access to capital and stronger investor confidence.
“India’s financial institutions will continue to ride the country’s good economic growth momentum. Their domestic focus and the improving resolution system for bad loans give them a competitive edge,” S&P said.
Also Read : India-China Relations Must Rest on Mutual Respect, MEA