Fitch Ratings upgrades viability ratings of major Indian banks amid improved asset quality

Global rating agency Fitch Ratings has upgraded the Viability Ratings (VRs) of several major lenders, citing improved asset quality and risk management.

The entity said that the upgrades reflect stronger underwriting standards, better loan diversification and suggested that banks are now better equipped to absorb financial shocks than they were in the past.

"The recent upgrades of Indian banks ' Viability Ratings reflect improved risk profile and asset quality," Fitch stated.

Previously in March 2025, Fitch raised the VRs of Punjab National Bank, Union Bank of India, and Bank of India. Each now holds a Viability Rating of bb- alongside an Issuer Default Rating (IDR) of BBB-/Stable.

The momentum continued in April 2025, with upgrades for Bank of Maharashtra and ICICI Bank Limited. While Bank of Maharashtra shares the bb- VR and BBB-/Stable IDR rating, ICICI Bank emerged as the strongest performer, with a bb+ VR and a BB+/Stable IDR, currently the highest VR among the nine large Indian banks evaluated by Fitch.

Despite the upgrades in Viability Ratings, the agency has not altered the banks’ IDRs, noting these are majorly influenced by the government’s capacity and willingness to provide extraordinary support during times of stress. As such, improvements in a bank’s internal strength alone do not trigger a change in the IDR.

The report did, however, highlight that some lenders like the Bank of Baroda and Canara Bank continue to face constraints on their VRs, driven by aggressive growth strategies and risks tied to newly issued loans. Fitch suggested that sustained financial discipline could pave the way for future upgrades.

With the latest changes, all nine large Indian banks rated by Fitch now fall within the ‘bb’ category for VRs, a sign of moderate financial strength. ICICI Bank stands at the top of this cohort, benefiting from a lower risk appetite and a more stable operating record.