India Inc’s credit ratio fell sharply to 1.50 in the second half of FY26 from 2.17 in the first half, as rating upgrades slowed and downgrades edged up, Crisil Ratings said on Wednesday. 

The credit ratio, which measures upgrades relative to downgrades, was driven by 383 upgrades against 255 downgrades during the period while the upgrade rate fell to 10.6% from the earlier 14%. 

Even as the ratio moderated, corporate balance sheets remained resilient, with the reaffirmation rate improving to around 82%, indicating stability across most sectors. 

Domestic support cushions impact 

The report attributed the moderation to global uncertainties, including tariff-related pressures on export-oriented sectors, along with a marginal rise in downgrade rates. 

Despite this, domestic factors such as infrastructure spending, tax cuts, and steady demand are expected to support credit profiles going ahead, especially in sectors such as infrastructure, defence, and healthcare. 

West Asia conflicts pose a key risk 

However, Crisil flagged the ongoing West Asia conflicts as a key monitorable, given its potential impact on input costs and supply chains. “Our assessment indicates 23 of these 30 sectors will see limited impact on credit profiles because of the conflict despite higher input prices and disruption in gas supply,” said Subodh Rai, Managing Director, Crisil Ratings. 

He added that “a prolonged conflict would… be a systemic risk and could have a cascading impact on India Inc's credit quality.” 

The agency’s analysis showed that only one sector, ceramics, may face severe stress while six other sectors, including airlines and auto components, could see moderate pressure on margins. 

Looking ahead, Crisil expects India Inc’s credit quality outlook to remain “stable but cautious” in FY27. “Corporate India’s agility and resilience are being tested again… Our credit quality outlook is stable for now… but overall, we remain cautious,” said Somasekhar Vemuri, Senior Director, Crisil Ratings. 

Bank credit growth is likely to ease slightly to around 13% in FY27 while non-bank lenders are expected to maintain steady expansion, supported by consumption demand.