New Delhi, Mar 4 (KNN) Fitch Ratings on Monday reported that Indian banks have performed robustly in the first nine months of the current financial year, with the sector’s impaired loan ratio approaching its lowest point.
The global rating agency stated that improvements in key performance metrics of Indian banks over recent years will provide strong support for their Viability Ratings.
According to Fitch, 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.
The improvement in banks’ gross impaired loan ratios and earnings has been driven by lower legacy bad loans.
However, Fitch noted that these risk enhancements have yet to be fully tested, and banks have historically varied their risk appetite through cycles, such as the recent growth in unsecured personal loans until regulatory measures discouraged this behavior.
“Indian banks performed robustly in the first nine months of the financial year ending March 2025 (9MFY25), with most key financial metrics improving to beyond Fitch’s expectations. The sector’s Return on Assets (ROA) improved by about 10bp to 1.4 per cent in 9MFY25 from FY24,” the agency said.
“The sector’s impaired loan ratio is close to the trough, but there remains potential for improvement in FY26,” Fitch added. The ratio fell by approximately 40bp from FY24 to 2.4 per cent in December 2024, with Punjab National Bank experiencing the biggest decrease, mainly driven by legacy bad loan write-offs.
(KNN Bureau)
