India’s economic growth prospects are expected to remain robust in the medium term, projecting an annual GDP expansion of 6-7.1% during fiscal years 2024-2026, according to S&P Global Ratings. The report, titled ‘Global Banks Country-By-Country Outlook 2024,’ highlights positive trends in the banking sector, anticipating a decline in weak loans to 3-3.5% of gross advances by March 31, 2025. Structural improvements, including sound corporate balance sheets, stringent underwriting standards, and enhanced risk management practices, contribute to this positive outlook.
S&P emphasizes that interest rates in India are unlikely to witness significant increases, mitigating risks for the banking industry. Despite the rapid growth of unsecured personal loans, the report notes that healthy underwriting standards for retail loans, coupled with manageable delinquency levels, contribute to the sector’s stability. The agency recognizes the impact of global uncertainty on the Indian economy but anticipates a lower influence due to India’s domestic orientation.
The report underscores the continuation of economic growth momentum in India. The country’s real GDP grew by 7.8% year-on-year in the June quarter, exceeding the 6.1% recorded in the March quarter. The Reserve Bank of India projects a 6.5% economic growth rate for fiscal years 2023-24 and 2024-25. While acknowledging that some public-sector banks still grapple with substantial risky assets, S&P notes that major players like the State Bank of India and leading private-sector banks have effectively addressed asset-quality concerns. However, it highlights that certain public-sector banks lag in performance, holding considerable risky assets, leading to higher credit losses and reduced profitability.
