In its commentary, the global rating agency Fitch Ratings said that Indian banks exhibited robust performance in the first nine months of the current financial year, with the sector’s impaired loan ratio close to the trough. It added that there is potential for improvement in the impaired loan ratio for FY26.
Fitch also said that the improvements in key performance metrics of Indian banks in the past few years will strongly support their Viability Ratings (VRs). The Indian banking sector’s Return on Assets (ROA) improved by about 10bp to 1.4% in 9MFY25 from FY24.
The rating agency said that Indian banks’ risk appetites have been more calibrated since 2018, with efforts to diversify loans and improve the quality of corporate exposures contributing to lower bad loan formation. Further, it added that lower legacy bad loans drove improvement in banks’ gross impaired loan ratios and earnings.
In separate news, it has said that Wipro’s revenue is likely to increase by about 4.5% in FY26, mainly driven by favourable sectoral trends and recovery in discretionary customer spending.
However, the agency noted that these risk enhancements have yet to be fully tested, and banks have tended to vary their risk appetite through cycles, such as the growth in unsecured personal loans in recent years until regulatory measures discouraged this behaviour.
The article originally appeared on Upstox.
