New Delhi

Fitch Ratings has maintained a ‘Neutral’ outlook for India’s auto loan asset-backed securities (ABS) sector for 2026, citing expectations of stable asset performance supported by resilient domestic economic growth.

The rating agency said India’s economy is projected to grow by a strong 7.4 per cent in FY26 before moderating to 6.4 per cent in FY27.

Fitch noted that all its rated auto loan ABS transactions are backed by secured loans linked to income-generating assets such as commercial vehicles, which should help sustain steady loan performance amid robust growth conditions. Domestic demand is expected to remain the primary driver of economic momentum despite global trade uncertainties.

Strong real income growth is likely to support consumer spending, while public capital expenditure will continue to underpin asset performance, though its growth may ease due to tighter fiscal policy. Private investment activity is expected to improve in the second half of FY27 as financial conditions gradually loosen.

The agency said higher US tariffs are unlikely to have a significant direct impact on its rated transactions. While trade-related uncertainties could affect sentiment, the freight industry has historically adapted by reallocating activity across sectors.

Tractor loans continue to form a sizeable share of underlying loan pools, increasing exposure to agriculture. Fitch highlighted that southwest monsoon rainfall in 2025 was nearly 8 per cent above the long-term average, supporting crop sowing, farm output and incomes.

As of the November 2025 payout month, loans overdue by over 90 days averaged 0.8 per cent across Fitch-rated Indian auto loan ABS transactions, with delinquency levels expected to remain broadly stable.

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Fitch cautioned that asset performance could weaken in the event of a sharp economic slowdown or material relaxation in underwriting standards. The outlook on all Fitch-rated Indian auto loan ABS transactions remains stable, supported by structural protections and rising credit enhancement buffers.