Financial sector stalwarts have hailed India’s rating upgrade by Moody’s, saying it was long overdue and will reduce the borrowing cost for the country.

Moody’s Investors Service on Friday raised India’s sovereign rating for the first time in 13 years, saying growth prospects have improved with continued progress on economic and institutional reforms.

SBI Chairman Rajnish Kumar said it is a positive development that will be a great enabler for the Indian financial markets.

“The bond yields, Indian rupee and stock markets have already reacted favourably. Over a point of time, this will reduce borrowing costs of the government and financial institutions and result in increased investor confidence in the India growth and reform story,” Kumar said in a statement.

The US-based agency upped India’s rating to Baa2 from Baa3 and changed its rating outlook to ‘stable’ from ‘positive’, saying the reforms will help stabilise rising levels of debt.

It also upgraded India’s local currency senior unsecured rating to Baa2 from Baa3.

ICICI Bank MD & CEO Chanda Kochhar said this is a well deserved recognition of the structural reforms taken by the Modi government over the past couple of years.

“The economic reforms have targeted overall formalisation of the economy through manifold measures…This is also a huge positive for the Indian government and Indian corporates as it reduces borrowing costs for the government and will lead to lower credit risk premiums for corporates leading to cheaper cost of capital.

“These structural reforms will help in cementing the sustainability of our fiscal path over the medium term by boosting government revenues and making the expenditure profile more efficient,” Kochhar said.

The move will also help improve availability and access to capital overseas for Indian companies, she added.

Mortgage lender HDFC Ltd Vice Chairman and CEO Keki Mistry said the rating agencies are now beginning to recognise India’s potential.

“I think the initiatives the government has taken in recent times in various ways like demonetisation, GST, RERA…that is taking its effect and rating agencies are now beginning o recognise India’s potential and I think it is a great move and a great upgrade,” Mistry said.

HDFC Chairman Deepak Parekh said India deserved it much earlier.

“The rating agencies always take time to analyse…So I think it was long overdue and I always felt that the rating agencies are not being fair on India because particularly in the last one and half year, number of transformatory and big bang reforms have been executed by the government, so on these grounds, they should have done it much earlier,” Parekh added.

Rana Kapoor, MD and CEO Yes Bank said the long overdue sovereign rating upgrade for India is an endorsement of institutional and structural transformations ushered in by the government in the last few years while maintaining fiscal prudence.

This was earlier vindicated by the sharp jump in India’s Ease of Doing Business ranking. Such global ratifications will lower the cost of borrowing and boost investor confidence and conviction in the economy, Kapoor said.

“Moodys ratings upgrade is a testimony of the fact that the government’s roadmap of fiscal reforms is on the right path. It is a positive step for overall Indian economy and help in attracting global inflows into India. It will also provide relief to corporates on their borrowing costs,” said George Alexander Muthoot, MD, Muthoot Finance.

Bank of America Merrill Lynch (BofAML) Economist and Co-Head of India Research Indranil Sen Gupta said the rating upgrade supports its call that risks in India’s government securities (G-sec) markets are overdone.

“We still expect policy steps to cool the risks to enable banks to cut lending rates. The Reserve Bank should cut rates on December 6 to signal a lending rate cut before the busy season with inflation well under control,” Sen Gupta said.

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