Fitch Ratings praises India's banking sector, noting a tighter risk framework, improved regulatory oversight, and declining loans under forbearance are strengthening systemic resilience. The agency highlights robust growth and better risk controls.
Global credit rating agency Fitch Ratings on Tuesday said a tighter risk framework is helping in strengthening India's bank operating environment, reflecting improving systemic resilience and risk controls in the Indian banking sector.
Improved Risk Framework and Regulatory Oversight
In its latest research, Fitch noted that "India's Loans Under Forbearance Have Declined", indicating fewer distressed exposures and a return to more disciplined credit practices. The agency said the reduction of such temporary relief measures introduced during earlier stress periods has improved transparency around asset quality and credit risk.
"We believe regulatory responses to stress events, frameworks for monitoring risks and recovery of impaired loans have improved in recent years", noted the report.
Fitch's analysis highlights that enhanced regulatory oversight and stricter risk frameworks have contributed to a more robust operating backdrop for lenders.
Banks Better Positioned to Manage Loan Risks
According to the rating agency, Indian banks have benefited from a combination of strong economic growth, improved asset quality, and prudent risk management. The report underscores that tighter risk discipline within banks is a critical factor underpinning greater resilience.
"We think banks are better positioned to monitor and control loan risks. The Central Repository of Information on Large Credits, established in 2014, has been effective in containing risks associated with large corporate loans, while improved retail credit bureau data access and reporting has reduced risk of a significant build-up of retail stress," added the report.
Sector-Wide Progress and Confidence
Fitch's comments come amid broader data showing the Indian banking system making significant progress post-pandemic, with gross non-performing assets (NPAs) at multi-year lows and strong balance sheet metrics across lenders. The rating agency assessment aligns with recent central bank data showing that gross NPAs have trended downward, supported by recoveries, write-offs, and improved underwriting standards.
RBI's periodic stress tests and supervisory actions have also reinforced confidence in the sector's ability to absorb shocks.
Medium-Term Growth Outlook
Fitch said "Over the medium term, the country's robust economic growth - above 6 per cent over the next two years - should continue to offer banks ample opportunities for profitable lending growth".
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