S&P Global Ratings upgraded the long-term credit ratings of 10 major financial institutions, including the State Bank of India (SBI), HDFC Bank, and Tata Capital on August 15. This follows the US-based agency’s upgrade of India’s sovereign rating to ‘BBB’ from ‘BBB-’, its first revision in 18 years, since 2007.

Bank of America Securities are of the view that S&P Global Ratings’ may have a limited immediate market impact, even as it strengthens the government’s fiscal credibility and could lower borrowing costs.

“While positive, the near-term effect may be modest. Tariff-related growth uncertainties are likely to dominate, and their impact on capital flows and credit costs will take time to show,” Bank of America noted.

Upgrades Meant for Economic Growth and Reforms 

 The upgrades reflect the strong growth prospects of Indian banks and finance companies, supported by robust economic momentum and structural improvements such as better recovery of bad loans. S&P expects banks to maintain healthy profitability, strong capitalisation, and adequate asset quality over the next one to two years, despite some pockets of stress.

The rating boost covers seven banks: SBI, ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank, Union Bank of India, and Indian Bank,  and three finance companies: Bajaj Finance, Tata Capital, and L&T Finance. The agency also highlighted the positive impact of the Insolvency and Bankruptcy Code (IBC), introduced in 2016, which has strengthened the rule of law, improved payment culture, and promoted restructuring of viable companies.

“India’s financial institutions will continue to ride the country’s good economic growth momentum. These entities will benefit from their domestic focus and structural improvements in the system such as the recovery of bad loans,” said S&P Global Ratings. 

Broader Market Inferences
The upgrades reflect the growing confidence in India’s financial system. S&P had also raised ratings for large public and private enterprises such as ONGC, Power Grid, NTPC, Tata Power, the Export-Import Bank of India, and Indian Railway Finance Corp., signaling overall economic resilience.

India’s real GDP grew at an average of 8.8% between FY2022 and FY2024—the fastest in the Asia-Pacific region—and S&P expects this momentum to continue, projecting annual growth of 6.8% over the next three years.

With India now on a firmer footing, the rating upgrades mark a milestone for investors and financial institutions, reflecting both the promise of continued growth and the strength of the country’s banking and finance ecosystem.