FY26 will be year of headwinds for credit market: Ind-Ra
Credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has forecasted that fiscal 2026 (FY26) will be a year of headwinds for the credit market, led by externalities, length and breath of indebtedness in the retail lending space, volatile banking system liquidity and domestic growth-inflation conundrums.
According to the report, liquidity has improved on a year-to-date basis in the current fiscal, while it will remain volatile in the next fiscal and will act as a deterrent for commercial banks in terms of addressing adverse loan-to-deposit ratios and asset liability pricing. Subsequently, volatility in the banking system may have an impact on domestic money market.
The rating agency further noted that spreads of non-banking financial companies are likely to increase further with the rising uncertainties over asset quality and it also expects moderate-to-strong deterioration in various asset classes during the year.
It said therefore, it is obvious that the credit premium would inch up in the financial sector, applicable for both bank and capital market lending. Ind-Ra further stated that while NBFCs’ asset quality could weaken, corporates’ asset quality might remain resilient with minor moderation.
