S&P Global Ratings said on Thursday that India’s economic development prospects should be robust in the medium term, with GDP growing by 6.7% to 7.1% yearly in the fiscal years 2024 to 2026.
According to a report by S&P titled “Global Banks Country-By-Country Outlook 2024,” structural improvements such as stronger corporate balance sheets, stricter underwriting guidelines, and enhanced risk-management procedures will cause the percentage of weak loans in the banking sector to drop to 3-3.5 percent of gross advances by March 31, 2025.
It also said that there is no chance of a significant increase in interest rates in India, which should reduce risk for the banking sector.
The amount of unsecured personal loans has increased quickly and may be a factor in future NPLs. Deepali Seth Chhabria, a primary credit analyst at S&P, said, “We think the underwriting standards for retail loans are generally still sound, and the overall level of delinquencies stays within acceptable limits for this product category.”
According to the analysis, the Indian economy would be less affected by uncertainty across the world.
Reduced external demand and global growth will have an impact on economic activity and may lead to more inflation. The agency does, however, anticipate that India’s domestic focus would have less of an impact on economic development, it said.
“The impetus for economic growth will not abate. Over the medium term, India’s economic development prospects should be high, with GDP growing by 6.7% to 7.1% yearly in the fiscal years 2024 to 2026, according to S&P.
India’s real GDP increased by 7.8% year over year in the June quarter compared to the March quarter’s 6.1% increase.
The Reserve Bank of India has projected GDP growth for the fiscal years 2023–24 and 2024–25 at 6.5%.
The State Bank of India and the top private-sector banks have mostly resolved their asset-quality issues, according to the study.
In addition to underperforming the industry, many public-sector banks continue to hold comparatively large amounts of toxic assets, which will increase credit losses and reduce profitability.
