Indian Banks' Resilience: Navigating Financial Improvement

Fitch Ratings highlights the robust performance of Indian banks, noting improved key financial metrics. Despite the progress in lowering bad loan ratios, full risk enhancements remain untested. The banks' diverse loan strategies and regulatory measures have shaped their current position, showing potential for further advancements in the financial sector.

Fitch Ratings announced on Monday that Indian banks have shown strong performance during the first nine months of the current financial year, with the sector's impaired loan ratio nearing a historic low.

The rating agency's commentary applauded key performance metrics improvements, which boost the banks' Viability Ratings. Since 2018, Indian banks have aimed to diversify loans and enhance corporate exposure quality, reducing bad loan formation.

However, Fitch warned that while these risk refinements are noteworthy, they have yet to be fully tested. Banks' varied risk appetites, such as growth in unsecured personal loans, are subject to regulatory measures affecting future strategies.

(With inputs from agencies.)