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India’s auto loan asset-backed securities (ABS) market is likely to stay steady over the next couple of years, helped by strong domestic economic conditions even as global uncertainties linger, according to Fitch Ratings. The ratings agency has kept its outlook for the sector at ‘Neutral’, citing firm consumer demand, steady income growth and the fact that most auto loans are backed by underlying assets. In its latest note, Fitch said India’s economy is expected to grow by 7.4 per cent in FY26, before easing to 6.4 per cent in FY27. While risks from the global trade environment remain, the agency believes domestic demand will continue to drive growth. This, in turn, should support borrowers’ repayment capacity and keep overall performance in the auto loan ABS market stable.

Fitch has highlighted that all the auto loan ABS transactions it rates in India are backed by secured loans, mostly tied to income-generating assets like commercial vehicles. The agency also pointed out that rising real incomes and steady consumer spending are likely to support borrowers’ ability to repay. Even amid uncertain global trade conditions, Fitch expects India’s largely domestic-driven growth to protect the auto loan ABS segment from significant shocks.

Public spending has played a big role in driving growth over the past few years and is expected to continue doing so, though at a more measured pace as fiscal space tightens.

Fitch does not expect higher US tariffs to have any meaningful direct impact on the Indian auto loan ABS deals it rates. While trade-related uncertainty could weigh on sentiment, the agency noted that the freight and transport sector has typically adjusted by redirecting activity across segments, as long as domestic economic conditions are stable. With India’s internal demand holding up, Fitch believes any spillover from global disruptions on auto loan repayments should remain limited.

Tractor loans have formed a meaningful share of auto loan pools in recent years, increasing exposure to the agricultural sector. On this front, Fitch struck an optimistic note. This supported strong kharif sowing, which is expected to lift farm output and rural incomes - an important factor for tractor loan performance.

As of the November 2025 payout month, loans overdue by more than 90 days accounted for just 0.8 per cent of outstanding balances across Fitch-rated Indian auto loan ABS transactions. Fitch expects delinquency levels to remain broadly stable in the near term. That said, the agency cautioned that asset performance could weaken if economic growth slows sharply due to severe global disruptions or if lenders significantly loosen underwriting standards.

The rating agency reiterated that the outlook on all Fitch-rated Indian auto loan ABS transactions remains Stable, supported by sequential transaction structures and increasing credit enhancement buffers. For investors, this suggests predictable performance rather than rapid upside, but also limited downside risks under current conditions.