New Delhi: Moody’s Ratings on Monday projected India’s economy to grow at 6.4 per cent in the 2026–27 fiscal year, making it the fastest-growing major economy among G-20 nations.
In its latest outlook on India’s banking system, the global ratings agency said the growth momentum will be powered primarily by strong domestic consumption, supportive policy measures and a stable financial sector.
Moody’s noted that the overall operating environment for Indian banks is expected to remain robust in 2026, aided by favourable macroeconomic conditions and ongoing structural reforms.
According to the report, asset quality across banks will stay resilient, although some pressure may be seen in the micro, small and medium enterprises (MSME) segment.
Despite this stress, Moody’s said banks are well-capitalised and have adequate buffers to absorb potential loan losses without major disruptions.
The agency highlighted that policy steps such as the rationalisation of the Goods and Services Tax (GST) in September 2025 and the earlier hike in personal income tax exemption limits have improved consumer affordability.
These measures, it said, are likely to support consumption-led growth and sustain domestic demand in the coming fiscal year.
Moody’s GDP growth projection, however, remains lower than the 6.8 to 7.2 per cent growth range estimated by the Finance Ministry’s Economic Survey presented in Parliament last month.
Official data suggests that India’s economy is expected to grow at a stronger pace of 7.4 per cent in the current fiscal year (2025–26), compared to 6.5 per cent growth recorded in 2024–25.
On the monetary front, Moody’s said the Reserve Bank of India (RBI) may consider further easing only if there are clear signs of an economic slowdown, with inflation currently under control.
The RBI has already reduced its policy rate by a cumulative 125 basis points to 5.25 per cent during 2025.
Moody’s also forecast system-wide credit growth to rise moderately to 11–13 per cent in FY27, compared to 10.6 per cent recorded so far in FY26.
Corporate loan quality is expected to remain strong, supported by healthier balance sheets and improved profitability among large firms, while recoveries from stressed assets may slow as most major cases have already been resolved.
The agency added that banks’ funding and liquidity positions will stay stable, with loan growth broadly aligned with deposit growth, and reaffirmed its expectation of government support for banks during periods of stress.
