Corporate Debt
Indian corporate debt growth may moderate as cos deleverage, says Moody's
This story was originally published at 18:14 IST on 6 October 2025
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NEW DELHI – Despite corporate loan books growing faster in India compared to its regional peers, the growth is likely to moderate in the next one to two years as corporates gradually deleverage, Moody's Ratings said Monday. "Corporate asset risks in India remain moderate, with the higher proportion of debt at risk balanced by the banking system's lower stock of underperforming loans and gradual moderation of corporate leverage," the rating agency said in a sector report on corporate debt of the Association of Southeast Asian Nations and India.
According to the report, system-wide loans grew at a compound annual growth rate of over 14% during 2020-21 (Apr-Mar) to FY25, while corporate loans grew at over 10% during the period. "Growth of corporate debt is also expected to moderate, despite resilient economic growth in India, as companies rely more on internal capital generation and equity sales to raise funds," the report said. ASEAN comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
Moody's said that macroeconomic uncertainty will weigh on corporates' debt servicing capacity. But the moderation in economic growth is less evident in India, given its more domestically driven economy and lower reliance on trade. The sweeping tariffs imposed by the US have cast a dark shadow over the global macroeconomic landscape, with many countries facing acute risks to their growth due to high tariffs, volatile currencies, and shifting geopolitical alliances.
According to the report, over the past few years, foreign currency corporate debt levels have moderated across the region, largely driven by narrow interest rate differentials between domestic and US dollar borrowings, which have made borrowing costs less susceptible to foreign exchange volatility. However, corporates will be incentivised to seek offshore financing should the interest rate differential increase, the rating agency said.
Over the last few financial years, Indian corporates have tapped foreign markets, such as the Tokyo Yen market, to raise funds and keep the cost of funds under control, especially when the Reserve Bank of India held the interest rate at 6.5?tween February 2023 and February 2025. Since then, the central bank has lowered the headline interest rate by 100 basis points so far this year.
Corporate delinquencies are also lower compared to system-wide trends, the report said, adding that most banks in the region maintain adequate loss-absorption buffers to withstand some asset quality deterioration, if at all. "For most economies in the region, we expect corporate NPLs (non-performing loans) to remain below the system-wide average as the majority of corporates have adequate financial buffers to cope with rapidly changing economic and trade conditions, compared to small and medium enterprises and retail borrowers," Moody's said. End
Reported by Priyasmita Dutta
Edited by Saji George Titus
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