New Delhi: India's banking sector is better positioned than many APAC peers to absorb the economic fallout from the war waged by the US and Israel against Iran, although small borrowers may face pressure if oil prices remain elevated, Fitch Ratings said on Tuesday.
The assessment comes as several banking sectors in the Asia-Pacific (APAC) face mounting pressure from higher fuel costs and weaker growth prospects.
The London-headquartered rating agency downgraded its outlook for banks in the Philippines and Sri Lanka, while maintaining a 'neutral' outlook on India, South Korea and Indonesia.
Earlier, it had lowered India's 2026-27 gross domestic product (GDP) growth forecast to 6.4% from its previous projection of 6.7%. The Indian economy grew 7.7% in 2025-26, according to official estimates.
"We expect GDP growth to ease to 6.4 per cent in FY27, a downward revision of 0.3pp from March. Domestic demand will be the main driver of growth, but lower imports in real terms imply positive contributions to growth from net external demand," Fitch Ratings said in its June Global Economic Outlook.
Last week, the Reserve Bank of India pared its growth forecast for 2026-27 to 6.6% and raised its inflation projection to 5.1%.
The rating agency said the slowdown in the economy will be most apparent in the second and third quarters of this fiscal, as increasing prices due to the war erode real incomes and dampen consumer spending.
