India’s financial sector shows significant improvement with record-high profitability, low delinquencies, and stable credit ratings, according to Moody’s and Icra Ratings. As banks and NBFCs capitalize on strong economic growth, higher lending in key sectors such as infrastructure, energy, and manufacturing is expected to drive further stability and expansion.
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India’s financial system has shown significant improvement in credit quality in recent years, supported by record-high profitability, low delinquencies, and stable domestic-oriented funding, according to a report by Moody’s and its domestic subsidiary, Icra Ratings. The financial sector is now well-positioned to leverage strong economic growth, with robust credit growth anticipated in the future.
In FY24, the financial system achieved a record-high profitability of over Rs 3 trillion. This remarkable performance, coupled with low delinquencies, underpins the stable credit ratings of banks and non-bank finance companies (NBFCs). These financial institutions are set to capitalize on the country’s strong economic prospects by increasing lending across various sectors, including infrastructure, energy transition, manufacturing, small businesses, and retail.
The report highlights that the system-wide credit quality has strengthened over the past three to four years, contributing to the current favorable financial landscape. This improvement is reflected in the enhanced profitability and low levels of delinquency, which bolster the stability of credit ratings.
Moreover, the report notes that financial institutions have improved their capitalization through healthy internal accruals and capital raising from buoyant debt and equity markets. This improved capitalization further strengthens their ability to support and drive economic growth.
The strong economic outlook for India, combined with the improved financial health of banks and NBFCs, positions the financial sector to seize opportunities and contribute to higher lending and economic development. As a result, India’s financial system is expected to play a crucial role in the country’s ongoing economic growth and stability.
In summary, India’s financial sector has achieved notable improvements in credit quality and profitability, supported by low delinquencies and stable funding sources. With enhanced capitalization and a positive economic outlook, banks and NBFCs are well-placed to drive credit growth and support the nation’s economic development.
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