NewKerala.com

Fitch: Tighter Risk Framework Strengthens India's Banking Environment

Fitch Ratings states that a tighter risk framework is strengthening India's banking operating environment, reflecting improved systemic resilience and controls. The agency notes a significant decline in loans under forbearance, indicating fewer distressed exposures and a return to disciplined credit practices. Enhanced regulatory oversight and tools like the Central Repository of Information on Large Credits are helping banks better monitor and control risks. Supported by robust economic growth above 6%, the sector shows strong fundamentals with gross NPAs at multi-year lows.

Key Points: Fitch Ratings: Stronger Risk Framework Boosts Indian Banks

  • Tighter risk framework strengthens banks
  • Loans under forbearance have declined
  • Improved asset quality and transparency
  • Strong economic growth supports lending
2 min read

Tighter risk framework strengthens India's banking operating environment: Fitch Ratings

Fitch Ratings says tighter risk controls and improved regulatory oversight are strengthening India's banking operating environment and systemic resilience.

"We believe regulatory responses to stress events, frameworks for monitoring risks and recovery of impaired loans have improved in recent years - Fitch Ratings"

New Delhi, January 6

Global credit rating agency Fitch Ratings on Tuesday said a tighter risk framework is helping in strengthening India's bank operating environment, reflecting improving systemic resilience and risk controls in the Indian banking sector.

In its latest research, Fitch noted that "India's Loans Under Forbearance Have Declined", indicating fewer distressed exposures and a return to more disciplined credit practices. The agency said the reduction of such temporary relief measures introduced during earlier stress periods has improved transparency around asset quality and credit risk.

"We believe regulatory responses to stress events, frameworks for monitoring risks and recovery of impaired loans have improved in recent years", noted the report.

Fitch's analysis highlights that enhanced regulatory oversight and stricter risk frameworks have contributed to a more robust operating backdrop for lenders.

According to the rating agency, Indian banks have benefited from a combination of strong economic growth, improved asset quality, and prudent risk management. The report underscores that tighter risk discipline within banks is a critical factor underpinning greater resilience.

"We think banks are better positioned to monitor and control loan risks. The Central Repository of Information on Large Credits, established in 2014, has been effective in containing risks associated with large corporate loans, while improved retail credit bureau data access and reporting has reduced risk of a significant build-up of retail stress," added the report.

Fitch's comments come amid broader data showing the Indian banking system making significant progress post-pandemic, with gross non-performing assets (NPAs) at multi-year lows and strong balance sheet metrics across lenders.

The rating agency assessment aligns with recent central bank data showing that gross NPAs have trended downward, supported by recoveries, write-offs, and improved underwriting standards. RBI's periodic stress tests and supervisory actions have also reinforced confidence in the sector's ability to absorb shocks.

Fitch said "Over the medium term, the country's robust economic growth - above 6 per cent over the next two years - should continue to offer banks ample opportunities for profitable lending growth".

- ANI

Share this article:

Reader Comments

S
Sarah B
As someone who works in finance, the mention of the Central Repository for Large Credits (CRILC) is key. It was a game-changer for transparency. Hopefully, this discipline extends to the growing retail and MSME loan books too.
P
Priya S
Good to hear NPAs are down. But I hope this improved "risk framework" also means banks won't be so quick to reject loan applications from small entrepreneurs like my brother. Sometimes the rules become too tight for genuine people.
V
Vikram M
The cleanup after the NPA crisis was painful but necessary. Kudos to the regulators and bankers who steered the ship. Now, with a strong foundation and 6%+ growth, the sector is poised for a healthy decade. Let's not repeat past mistakes.
R
Rohit P
Positive report, but we must remain vigilant. Global headwinds are strong. The real test will be how our banks handle stress if economic growth slows unexpectedly. The stress tests by RBI are crucial.
K
Kavya N
As a common depositor, this gives me peace of mind. After the PMC Bank scare, knowing that systems are stronger is a relief. Hope the focus on risk management continues at all levels, not just in reports.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50