S&P Global Ratings Upgrade of Indian Financial Institutions
S&P Global Ratings has upgraded the credit ratings of 10 Indian financial institutions after enhancing India's sovereign credit rating. This upgrade signals confidence in India's economic resilience and growth prospects.
Key Actions and Expectations
- Upgraded the long-term issuer credit ratings of seven Indian banks and three finance companies.
- India's sovereign ratings were upgraded to 'BBB/Stable/A-2' from 'BBB-/Positive/A-3'.
Economic and Financial Insights
- S&P expects India's sound economic fundamentals to support growth over the next two to three years.
- Monetary policies are seen as increasingly effective in managing inflationary expectations.
Impact on Financial Institutions
Indian financial institutions are expected to benefit from the country's economic growth and structural improvements, such as enhanced mechanisms for recovering bad loans.
Insolvency and Bankruptcy Code (IBC)
- IBC has improved the payment culture and rule of law in India.
- The average resolution time for bad loans has reduced to less than two years from six to eight years previously.
- Recovery values have increased to more than 30% from 15-20% under the previous bankruptcy regime.
GDP Growth Projections
- India's real GDP growth averaged 8.8% between fiscal years 2022 and 2024, the highest in the Asia-Pacific region.
- S&P projects average annual growth of 6.8% over the next three years.