MUMBAI: Rating agencies like Crisil and CareEdge reported a moderation in rating ratios during the second half (H2) of 2025-26 (FY26) compared with the first half (H1), while India Ratings & Research (Ind-Ra) said the upgrade-to-downgrade (U/D) ratio dipped in FY26 relative to 2024-25 (FY25).
Icra, however, said that the credit ratio improved to 3.1x in FY26 from 2x in FY25, with 388 upgrades versus 124 downgrades. The agency said the default rate remained low at 0.4 per cent, indicating benign credit conditions.
According to Crisil, the credit ratio — the proportion of rating upgrades to downgrades — stood at 1.5x in H2FY26, moderating from 2.17x times in H1. Overall, there were 383 upgrades and 255 downgrades during the period.
“The downgrade rate edged up to 7 per cent (6.4 per cent in H1), a tad higher than the 10-year average. Consequently, the credit ratio moderated, with the overhang of tariff-related uncertainties impacting companies with greater dependence on exports,” Crisil said.
CareEdge Ratings reported that the credit ratio stood at 1.93x in H2FY26, lower than 2.56x in H1.
“The downgrade rate, at 7 per cent, remains below the long-term average of 10 per cent. However, the moderation in upgrades — from the long-term average of 15 per cent to 13 per cent in the current period — suggests that improvements in credit profiles are becoming more selective,” CareEdge said.
Ind-Ra said that the U/D ratio dipped slightly to 3.1 in FY26 from 3.5 in the previous year, while defaults edged up marginally to 0.8 per cent from 0.6 per cent in FY25.
The agency said FY26 credit profiles do not reflect early stress from the evolving West Asia conflict, as the escalation occurred only in the final month of the financial year.
“However, as the conflict continues to escalate, the five years of balance sheet strengthening undertaken by Corporate India since 2020-21 will be tested in 2026-27 (FY27),” Ind-Ra said.
Crisil added that the conflict is likely to increase cost pressures and necessitate a realignment of supply chains for India Inc.
“Amid this, India Inc’s credit quality outlook for FY27 is stable but cautious,” the agency said.
A stress test of 30 sectors conducted by Crisil showed that 23 of these sectors would see limited impact on credit profiles despite higher input prices and disruption in gas supply. These 30 sectors account for 65 per cent of Crisil’s rated corporate debt.
“The impact could be moderately negative for six sectors and adverse for one. A prolonged conflict would, however, pose a systemic risk and could have a cascading impact on India Inc’s credit quality,” said Subodh Rai, managing director, Crisil Ratings.
Crisil also forecast that bank credit growth in FY27 would moderate slightly to around 13 per cent, in line with overall economic growth. Commercial banks’ loan growth was 13.8 per cent year-on-year till the fortnight ended March 15, according to Reserve Bank of India data.
K Ravichandran, executive vice-president and chief rating officer at Icra, said easing US tariff risks, the India-European Union trade agreement, goods and services tax rate cuts, income-tax relief, moderating inflation, and monetary easing had improved the outlook for Indian corporates entering FY27.
However, he cautioned that the escalation in West Asia has reintroduced risks, particularly for energy and food security, with potential disruptions to oil, gas, and fertiliser supplies, possible strain on government finances due to subsidies, and pressure on corporate demand and margins amid rising inflation.
Source: Business Standard
