SBI, ICICI, HDFC, and more: S&P Global lifts ratings of 10 banks and finance firms

Following its decision to boost India’s sovereign credit rating after more than 18 years, S&P Global Ratings improved the ratings of ten significant Indian financial institutions on Friday, including Tata Capital, HDFC Bank, and State Bank of India.

Strong domestic economic momentum, structural changes, and advancements in bad loan recovery processes are expected to benefit Indian lenders and financiers, according to the agency.  “India’s financial institutions will continue to ride the country’s good economic growth momentum. These entities will benefit from their domestic focus and structural improvements in the system such as in the recovery of bad loans,” S&P Global Ratings said.

Long-term issuer credit upgrades were granted to seven banks: Indian Bank, Kotak Mahindra Bank, HDFC Bank, ICICI Bank, State Bank of India, and Axis Bank Ltd. Additionally, three financial firms were upgraded: L&T Finance, Tata Capital, and Bajaj Finance.

The agency highlighted that credit risks in India have declined, and banks are expected to sustain “adequate asset quality, good profitability, and enhanced capitalization over the next 12–24 months” despite pockets of stress.

On Thursday, S&P upgraded India’s sovereign rating from “BBB-” to “BBB,” a move it hadn’t taken since 2006. The agency stated that the decision was primarily influenced by India’s strong economic foundation and more advantageous monetary policies for managing inflation. Financial institutions’ ratings typically cannot surpass the nation’s because of their strong ties to the sovereign.

The Insolvency and Bankruptcy Code (IBC) of 2016 was also recognized by S&P with changing the credit culture in India. It stated that the law promoted reorganization of profitable businesses rather than liquidation, enhanced payment discipline, and tipped the scales in favor of creditors.

Large state-owned and private sector businesses were also upgraded by S&P on Thursday, in addition to banks and financiers. Oil and Natural Gas Corp. Ltd., Tata Power Co. Ltd., Power Grid Corp. of India Ltd., and NTPC Ltd. were promoted from “BBB-” to “BBB.” Stable outlooks were maintained for Indian Railway Finance Corp. and Export-Import Bank of India, which both earned comparable improvements.