Following S&P Global Ratings' upgrade of India's sovereign credit rating, the agency has also raised the long-term issuer credit ratings of ten major Indian financial institutions. This action, taken on Friday, August 15, 2025, reflects S&P's confidence in India's strong economic growth, improved asset quality, and the positive impact of structural reforms.

The upgrade affects seven banks: State Bank of India, ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank, Union Bank of India, and Indian Bank. Additionally, three finance companies also received upgrades: Bajaj Finance, Tata Capital, and L&T Finance.

S&P Global raised India's sovereign credit rating to 'BBB' from 'BBB-'. This was India's first sovereign upgrade by S&P in 18 years. The agency cited India's resilient economic fundamentals and more favorable monetary settings to control inflation as core drivers of the decision. The sovereign rating upgrade was based on strong growth momentum, better inflation management, and structural reforms such as the Insolvency and Bankruptcy Code (IBC).

The ratings of Indian financial institutions are closely tied to the sovereign rating, and generally cannot exceed it. S&P noted that these institutions are expected to benefit from the country's strong economic growth momentum, their domestic focus, and structural improvements in the system, particularly in the recovery of bad loans.

S&P expects Indian banks to maintain adequate asset quality, good profitability, and enhanced capitalization over the next 12–24 months, despite some pockets of stress. The agency also acknowledged the positive impact of the IBC, which was introduced in 2016. The IBC has strengthened creditor rights, improved payment discipline, and encouraged the restructuring of viable companies, thus reducing credit risk in the system.

In addition to the financial institutions, S&P also upgraded the ratings of several large state-owned and private sector enterprises to 'BBB' from 'BBB-' with stable outlooks. These include Oil and Natural Gas Corp. Ltd., Power Grid Corp. of India Ltd., NTPC Ltd., and Tata Power Co. Ltd. Export-Import Bank of India and Indian Railway Finance Corp. also received similar upgrades.

The upgrades reflect a broader positive outlook on the Indian economy. S&P's analysis suggests that India is well-positioned to continue its strong growth trajectory, supported by sound economic fundamentals and a commitment to fiscal consolidation. However, S&P also cautioned that the ratings of Indian financial institutions remain capped by the sovereign rating, given the close linkages between banks and the government.