Fitch revises Axis Bank outlook to positive, citing stronger sector environment

Fitch Ratings has revised the outlook on Axis Bank Ltd’s long-term issuer default rating to positive from stable, reflecting an improving operating environment for Indian banks, while affirming the rating at ‘BB+’, the agency said on Thursday.

Fitch also upgraded Axis Bank’s viability rating to ‘bb+’ from ‘bb’, citing sustained improvements in asset quality, capitalisation and profitability. The bank’s government support rating was affirmed at ‘bb+’, one notch below India’s sovereign rating.

The outlook

change follows Fitch’s decision to revise the Indian banking sector’s operating environment outlook to positive, driven by stronger regulation and supervision by the Reserve Bank of India, alongside resilient economic growth prospects.

“Axis’s rating is now driven by its viability rating, which reflects its strengthened financial profile and expectations that these gains will be sustained in a more supportive operating environment,” Fitch said.

The agency highlighted Axis Bank’s robust domestic franchise, diversified income mix and lower concentration risks, noting that the lender remains India’s third-largest private-sector bank with a strong presence in retail lending. Fitch also pointed to above-peer capital buffers, estimating the bank’s common equity Tier 1 ratio at 15.8% as of the nine months ended FY26.

Asset quality was another key driver, with Fitch expecting the bank’s impaired loan ratio to remain below 2% through FY27, supported by improved diversification and adequate loan-loss coverage. Profitability is forecast to stabilise, with operating profit to risk-weighted assets expected to average around 3% through FY28, despite a brief dip in FY26.

Fitch said Axis Bank’s growth appetite remains higher than the sector average, but added that stronger risk controls and pricing discipline should help contain risks, provided loan growth is managed without a material deterioration in asset quality.

The agency also reaffirmed its view that government support would likely be forthcoming in times of stress, given Axis Bank’s systemic importance, providing a backstop to its ratings.

Fitch noted that a potential upgrade could follow if the operating environment score for Indian banks is raised further or if the sovereign rating improves. Conversely, the outlook could revert to stable if the sector operating environment outlook is revised back to stable.

Separately, Fitch withdrew certain issue-specific and programme ratings, including Axis Bank’s medium-term note programme, saying these were no longer relevant as the bank’s viability rating now drives the long-term issuer rating.