Indian financial institutions' credit profiles could gain support from sizable foreign shareholder ownership, Fitch Ratings said in a recent release.

Foreign shareholding provides long-term capital and funding flexibility, business franchise improvement, and better governance standards, Fitch said.

Still, Fitch does not consider foreign ownership as an innately reliable indicator of better credit fundamentals, with transactions that boost internal controls, risk management, and leadership accountability having more credit relevance.

Increased interest from foreign shareholders points to growing confidence in India's long-term growth outlook and the financial industry's regulation and oversight, as well as better risk governance, Fitch said.

Fitch believes there is a greater likelihood of foreign investors owning control of nonbank financial institutions rather than those of banks, as full foreign ownership of NBFIs is allowed.

Minority shareholders can also have a sizable influence over NBFIs in the presence of business and operational synergies, Fitch said.