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Informist, Monday, Feb. 9, 2026

 

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--Moody's: Forecast India's GDP growth at 6.4% for FY27 
--Moody's: India banking sector outlook stable on strong econ growth 
--Moody's: Expect further interest rate cuts by RBI to be modest 
--Moody's: Indian banks' asset quality to remain resilient 
--Moody's: See some stress in Indian banks' MSME portfolios 
--Moody's: Indian banks have enough reserves to absorb loan losses 
--Moody's: Indian banks' NIMs to improve gradually amid stable loan rates
--Moody's: See India banking sector loan growth at 11-13% in FY27

 

MUMBAI – Economic growth is expected to remain strong in India in the next financial year starting April, which is expected to support the operating environment of banks in the country, Moody's Ratings said Monday. 

 

Moody's expects India's GDP to grow 6.4% in FY27, the fastest among Group of 20 economies but slower than the 7.4% growth projected by the government's first advance estimate for FY26. The rating agency's growth forecast for FY27 is lower than the 6.8-7.2% projected by the Economic Survey.

 

Economic activity is expected to be driven by strong domestic consumption and policy measures, the rating agency said. "The rationalisation of the goods and services tax (GST) in September 2025 and an earlier increase in personal income tax thresholds will help improve affordability for consumers and support consumption-led growth," Moody's said. 

 

The robust macroeconomic conditions and structural reforms will support the operating environment for India in 2026, the rating agency said. Moody's expects systemwide loan growth to be around 11–13% in FY27. Banks' loans were up 13.1% on year as of Jan. 15, according to latest data from the Reserve Bank of India.

 

The rating agency expects "modest" rate cuts by the RBI's Monetary Policy Commmittee going ahead, after the rate-setting panel lowered its policy repo rate by 125 basis points in 2025 to 5.25%. "...with inflation under control and growth momentum remaining strong, we anticipate it will further ease monetary policy in fiscal 2026-27 only if there are signs of a slowdown in economic activity," Moody's said in its Banking System Outlook report Monday. 

 

Indian banks' asset quality is seen staying resilient even as some stress is expected among the micro, small, and medium enterprises portfolios of lenders, Moody's said. Regardless, banks have built sufficient loan-loss reserves to absorb potential loan losses, the rating agency said. 

 

The rating agency expects the systemwide non-performing asset ratio to remain low at 2%-2.5% but sees the slippage ratio--the ratio of new NPAs to total loans--rising modestly as loans age. "Strong economic growth will support banks' asset quality. The quality of retail loans will be stable, particularly in the prime borrower segment, although it will diverge to some extent among lenders based on underwriting standards and target borrower groups," Moody's said.

 

Higher US tariffs announced in August will primarily affect MSMEs in export-oriented sectors such as textiles, and gems and jewelry, which collectively account for less than 5% of total systemwide loans. Operating conditions for these segments will gradually normalise following the announcement of the India-US trade deal. 

 

Net interest margins will improve gradually amid stable lending rates and lower deposit costs, which will support banks' profitability, Moody's said. Banks will maintain strong capitalisation, and their funding and liquidity will be stable with loans growing in line with deposits, Moody's said.

 

"We expect loans to grow in tandem with deposits, and hence, the systemwide loan-to-deposit (LDR) ratio to remain around 80%," Moody's said. "However, banks will face difficulty with deposit mobilisation amid heightened competition, particularly as growth in low-cost current account and savings account deposits continues to be modest despite the narrowing interest rate gap with term deposits."  End

 

Reported by Shubham Rana

Edited by Avishek Dutta

 

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