MUMBAI: S&P Global Ratings has upgraded the credit ratings of 10 major Indian financial institutions, including State Bank of India (SBI), HDFC Bank, and Tata Capital. The move follows the agency’s decision to raise India’s sovereign credit rating to ‘BBB’ from ‘BBB-‘ after more than 18 years.
According to S&P, the upgraded ratings reflect the positive economic outlook for India and improvements in the financial sector, such as more effective recovery mechanisms for bad loans.
The agency emphasised that Indian financial institutions are poised to benefit from strong domestic economic growth, their local focus, and structural reforms.
The rating upgrades cover seven banks – State Bank of India, ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank, Union Bank of India, and Indian Bank – as well as three non-banking financial companies – Bajaj Finance, Tata Capital, and L&T Finance.
S&P expects Indian banks to maintain healthy asset quality, solid profitability, and strong capitalisation over the next 12 to 24 months, despite some localised stress within the system.
Credi risk falls
The agency also noted a decline in overall credit risk.
The improved sovereign rating played a key role in the financial institutions’ upgrades, as S&P caps ratings for domestic entities based on the country’s sovereign credit profile. This reflects the significant direct and indirect influence the Indian government has on the financial sector.
S&P also highlighted the positive impact of the Insolvency and Bankruptcy Code (IBC), introduced in 2016. The code has strengthened the rule of law, improved payment discipline, and supported a more creditor-friendly environment, encouraging timely restructuring of viable businesses.
In addition to financial institutions, S&P also raised ratings on several major Indian public sector enterprises, including ONGC, Power Grid Corporation, NTPC, and Tata Power, upgrading them from ‘BBB-‘ to ‘BBB’ with a stable outlook.
The same upgrade was extended to the Export-Import Bank of India (India Exim) and Indian Railway Finance Corporation (IRFC).
