Crisil reports that Indian companies are well-positioned to withstand small increases in borrowing costs, supported by strong balance sheets and policy measures, despite some sectoral vulnerabilities and potential macroeconomic risks.
Crisil said India Inc could withstand a moderate rise in borrowing costs without a sharp deterioration in credit health, as stronger corporate balance sheets continue to absorb the shock of higher interest rates. The rating agency’s latest assessment comes at a time when markets are watching the Reserve Bank of India for signs that the repo rate could move again after a lengthy pause.
The agency’s sensitivity analysis suggests that a 25-basis-point increase in rates would trim median interest coverage by about 10 basis points, while a 50-basis-point rise would reduce it by roughly 20 basis points. Even then, Crisil estimates that interest coverage would stay near 5.1 times in the first scenario and around 5.0 times in the second, levels that still indicate a substantial cushion for most companies.
That resilience is not appearing in isolation. Crisil Ratings said in a separate assessment that the credit ratio for Indian companies rose to 2.18 times in the first half of the fiscal year, compared with 1.50 times in the previous half, reflecting stronger domestic demand and policy support. The firm also said the median debt-to-equity ratio remained close to 0.5 times, a sign that corporate leverage is still relatively contained.
Sector conditions are uneven, but infrastructure continues to look sturdier than many other parts of the economy. Crisil said strong debt-protection measures, tariff pass-throughs and healthy demand should help keep infrastructure broadly resilient if rates rise. Commercial property, by contrast, could face a more noticeable squeeze on debt-service coverage if borrowing costs move up by 50 basis points.
The wider macro backdrop remains supportive for credit, even if it is not risk-free. Crisil expects bank lending to grow by 14.5% to 15.5% in FY27, helped by demand from micro, small and medium-sized enterprises, retail borrowers and the continued use of working-capital lines. The company also said banks are likely to keep gross bad loans in a range of 2.0% to 2.2% by March 2027, supported by solid capital buffers and stable asset quality, although newer loans in fast-growing MSME portfolios bear watching.
At the same time, Crisil warned that the outlook could worsen if inflation climbs, geopolitical tensions persist, supply chains are disrupted or crude prices stay elevated. Weather-related stress extending into the Rabi season could also affect rural incomes and consumer demand. Even so, the agency said overall credit conditions remain steady for FY27, underpinned by government capital spending, policy support and healthier corporate finances.
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