Moody's Ratings has forecasted that economic growth of India for the next fiscal year 2026-27 (FY27) at 6.4%, which is fastest pace among G-20 economies. The agency has projected growth for the country based on parameters like strong domestic consumption, policy measures, and a stable banking system. In banking system outlook report, it said the bank’s asset quality will remain resilient, with some stress among micro, small and medium enterprises (MSMEs). Regardless, banks have sufficient reserves to absorb loan losses. It noted that the operating environment for banks will remain strong in 2026, supported by robust macroeconomic conditions and structural reforms.

It also said the goods and services tax (GST) rationalization in September 2025 and an earlier increase in personal income tax thresholds will help improve affordability for consumers and support consumption-led growth. Indicating inflation under control and growth momentum remaining strong, it estimated that the Central Bank will further ease monetary policy in fiscal 2026-27 only if there are signs of a slowdown in economic activity. It expects system-wide loan growth to accelerate slightly to 11-13 per cent in fiscal 2026–27, from 10.6 per cent in fiscal 2025-26 YTD.

It said ‘Corporate loan quality will remain healthy, supported by strong balance sheets and improved profitability among large companies. Recoveries will taper as banks have resolved stressed loans to large corporate’. It also said that banks will maintain strong capitalization, supported by internal capital generation that keeps pace with asset growth. Banks' funding and liquidity will be stable, with loans growing in line with deposits. Moody's mentioned that it expects that the government to provide strong support for banks in times of need.