Business Standard

S&P upgrades rating for Bajaj Finance, UBI, Shriram Finance & Hero Fincorp

The rating upgrade reflects the view that they will continue to improve their asset quality, benefiting from good economic prospects and structural improvements in operating conditions

banks

Representative Image

Abhijit Lele Mumbai
Global rating agency Standard and Poor’s (S&P) has upgraded the rating for four Indian financial sector players -- Bajaj Finance, Hero FinCorp, Shriram Finance, and public sector lender Union Bank of India. The rating upgrade reflects the view that they will continue to improve their asset quality, benefiting from good economic prospects and structural improvements in operating conditions.

Rating upgrade for Bajaj Finance is from “BB+” to “BBB-”, Hero FinCorp – from “BB” to “ BB+”, Shriram Finance – from “BB-” to “BB” and Union Bank of India’s – from “BB+” to “BBB-”.

S&P also affirmed the rating “BBB-/Stable/A-3” on 6 Indian banks – State Bank of India, HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank and Indian Bank -- at BBB-/Stable/A-3. It affirmed the rating on two non-banking finance firms - Muthoot Finance (BB/Stable/B), and Manappuram Finance Ltd – (BB-/Stable/B).

The rating agency, in a statement, said it also revised upward the assessment of stand-alone credit profiles (SACPs) of HDFC Bank, SBI, and ICICI Bank by one notch each.

However, the ratings on banks are capped by sovereign credit ratings in India. The global rating agency does not rate Indian banks above the sovereign because of the direct and indirect influence that the sovereign has on banks operating in the country.

S&P said a strong recovery is underway in the Indian financial sector. The banking system has unwound imbalances and sharply reduced the high stock of problem assets accumulated during the previous downturn. “We expect the system to maintain this good performance," it added.

The banking industry's weak loans ratio will continue to improve. The ratio was about 5.2 per cent of gross loans as of March 31, 2023. This is expected to decline to 3-3.5 per cent by March 31, 2025.

Indian banks, namely the scheduled commercial banks (mainly public sector banks and private sector banks), have sharply cut their high stock of problem assets accumulated during the previous downturn.

They have also reduced economic imbalances. Calibrated credit growth and a strong focus on underwriting and risk management will limit the buildup of imbalances over the next two years. Banks will benefit from India's strong economic growth and better consumer and business confidence, S&P added.

Don't miss the most important news and views of the day. Get them on our Telegram channel

First Published: Jun 27 2023 | 9:59 AM IST

Explore News