India Inc can weather 50 bps rate hike, El Nino impact: Crisil

Crisil Ratings stated on Wednesday that India Inc will remain unaffected even if the Reserve Bank delivers the widely expected 0.50 percentage point rate hike in the remainder of the calendar year.

The credit rating agency pointed out that the El Nino-led rainfall shortfall is also unlikely to dent rural demand, as non-crop incomes account for over 40 per cent of agricultural output and policy measures will offer support.

Additionally, the agency gave a stable outlook to credit performance going forward, noting that the geopolitical upheaval caused by the US-Israel aggression in the Middle East is unlikely to hurt corporate India.


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Despite the ongoing war, the agency reported that its 'credit ratio'—measuring upgrades relative to downgrades across its portfolio of 7,200 companies—rose during the first six months of FY27. The credit ratio stood at 2.18 times for H1FY27 compared to 1.5 times in H2FY26, signaling a boost in overall credit quality.

Subodh Rai, managing director of the agency, mentioned that stress tests conducted by Crisil reduced the number of sectors vulnerable to geopolitical tensions from six at the beginning of the fiscal year down to three.

He specified that diamond polishers, specialty chemicals, and polyester textiles remain at risk due to the conflict, whereas sectors such as airlines, ceramics, and flexible packaging saw their credit quality outlook upgraded to 'stable'.

Furthermore, Crisil projects that the banking system's gross non-performing assets ratio may tick up marginally to between 1.9-2 per cent by the close of the fiscal year, compared to 1.8 per cent in the prior-year period.

Also read: RBI may raise repo rate by 100 bps through H1 2027: BofA Securities

"A rate hike scenario of even up to 50 basis points (bps) appears largely manageable for India Inc," its chief criteria officer Somasekhar Vemuri told reporters, adding that corporate India is cushioned by its structural strengths including delevraged balance sheets.

The agency identified the weak monsoon as a vital factor to monitor, noting potential impacts on tractor manufacturers and microlenders; however, Rai reiterated that rural demand across the broader economy is unlikely to suffer.

"The agency pegged the overall credit growth for the banking system to come at up to 15.5 per cent led by strong growth from the small businesses and retail lending verticals. Corporate credit growth, which has witnessed a jump in recent past, will get a further leg up from bond market substitution theme if RBI hikes its interest rates," Vemuri said.

Crisil added that while recently raised diaspora deposits could squeeze bank margins, overall profitability ratios will remain unharmed.

Reflecting this positive momentum, India Ratings observed that domestic companies are navigating global headwinds resiliently, reporting 190 upgrades versus 63 downgrades in its rated universe during the April-September period.

"Strengthened corporate balance sheets, supported by resilient consumption demand, continued government capital spending, and calibrated private-sector investments, have underpinned Corporate India's credit stability," it said.

Similarly, peer rating agency Icra posted a credit ratio of 3.2 times for its universe—more than twice its 10-year average of 1.5 per cent.

"Looking ahead, elevated crude oil prices, deficient monsoon rainfall and rising inflation are expected to moderate consumption growth, particularly across rural-linked and discretionary sectors," its chief rating officer K Ravichandran said.

Careedge Ratings also saw its credit ratio almost double to 3.95 times in H1FY27, driven by 300 upgrades against 76 downgrades over the six-month span.

"Buoyant consumption, a pickup in investment, a healthy external position and India Inc's leaner balance sheets give us confidence in the resilience of the Indian economy looking ahead in fiscal 2027," its chief rating officer Sachin Gupta said.