Giving a positive indication towards the growth of the Indian economy, S&P Global Ratings said the growth prospects should remain strong over the medium term, with GDP expanding 6-7.1% annually in fiscal years 2024-2026.
in a report titled ‘Global Banks Country-By-Country Outlook 2024’, THE S&P said the banking sector’s weak loans will decline to 3-3.5% of gross advances by March 31, 2025, on the back of structural improvement, including healthy corporate balance sheets, tighter underwriting standards and improved risk-management practices.
The report further said that the State Bank of India and the leading private-sector banks have largely addressed their asset-quality challenges.
Many public-sector banks still carry relatively high volumes of weak assets, which will result in higher credit losses and hit profitability; their performance lags that of the industry.
The report said the interest rates in India are unlikely to rise materially, and this should limit the risk for the banking industry. It added that global uncertainties will have a lesser impact on the Indian economy.
Slower global growth and external demand will weigh on economic activity and could fuel further inflation. However, given that India is domestically oriented, the agency expects the economic growth to be less affected, the report added.
S&P Primary Credit Analyst Deepali Seth Chhabria said, “Unsecured personal loans have grown rapidly and could contribute to incremental NPLs. We believe underwriting standards for retail loans generally remain healthy and the overall level of delinquencies remains within acceptable limits for this product category.”
It is worth highlighting that in the June quarter, India’s real GDP rose 7.8% year-on-year up from 6.1% in the March quarter. India’s central bank, the Reserve Bank of India has forecast a 6.5% economic growth for the 2023-24 and 2024-25 fiscal years.
Recently, Morgan Stanley Research has also said India’s economy will grow at around 6.5% for FY2024 and FY2025, citing strong domestic fundamentals.
Also, Moody’s Investor Services retained India’s economic growth at 6.7% for 2023, citing the country’s remarkable resilience amid a global slowdown buoyed by solid domestic demand.