Fitch Ratings: Indian banks' viability ratings set to flourish amid improved conditions

In an analysis by Fitch Ratings, Indian banks' Viability Ratings (VR) are slated to experience a boost from an enhanced operational landscape and amplified performance in the foreseeable future. Fitch foresees the continuation of robust Viability Ratings (VR) for Indian banks, largely propelled by the bolstering operating conditions and sustained financial performance in the short run.

The Issuer Default Ratings (IDRs) are expected to maintain a steady course across banks. The IDR pivots on Fitch's anticipation of exceptional support from the Indian sovereign (BBB-/Stable) if the need arises.

Notably, two Indian banks' VRs received upgrades in 2023. There's potential for upward adjustments for several banks, buoyed by an expectation of maintaining the current positive financial performance, particularly in asset quality and earnings.

The revision of the operating environment score from 'bb' to 'bb+' has significantly contributed to supporting Fitch's overall assessment.

The Viability Ratings of Indian banks are diversified, with five out of eight placed within the 'bb' category. This placement underlines a moderate level of financial strength.

On the other hand, the remaining three banks possess VRs in the 'b' category, a status influenced by their risk profiles, past weaker financial metrics, and more vulnerable loss-absorption buffers compared to higher-rated counterparts.

Fitch emphasizes that risk profiles and capitalization will significantly affect the standalone credit profiles of the banks.

This aspect gains prominence amid the banks' expanding risk appetite, a crucial area under evaluation for their individual creditworthiness. (ANI)