Indian banks' operating environment strengthened as pandemic risks ebbed: Fitch

The operating environment for Indian banks has strengthened as economic risks associated with the Covid-19 pandemic have ebbed, said Fitch Ratings.

A number of indicators for the banking sector have also improved compared with pre-pandemic levels, the rating agency said.

“India was badly affected by the pandemic, but the associated risks have now receded,” said the rating agency in a report.

Fitch affirmed the sovereign's rating at 'BBB-/Stable' in May and it currently forecasts real GDP growth to average 6.4 per cent annually in the three years to March 2026, putting India among the fastest-growing sovereigns.

“Indian banks' loan growth over FY23 reached 15.4%, the highest since FY13. We believe this partly reflected pent-up credit demand following the pandemic, amid improved capacity for growth, especially among private-sector banks, as well as strong nominal GDP growth. We expect some normalisation in FY24, although credit demand has remained robust in 1QFY24,” it said. 

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