S&P Global Ratings on Monday said a quick resolution of Yes Bank’s insolvency will keep India’s banking sector contagion at bay, but as credit markets tighten there could be a possibility of a wider economic pain in the country.

“A quick resolution of Yes Bank’s insolvency will keep India’s bank-sector contagion at bay, though it poses pain for investors in bank hybrid securities. As credit markets tighten, we also see a possibility of wider economic pain in the country,” S&P Global Ratings said.

It said the Indian government has consistently supported weak commercial banks by promoting the merger of distressed institutions with stronger lenders and has historically not allowed commercial banks to fail.

“The current weak economic and high-fear global investment environment, in our view, has prompted the government to support the recovery of Yes Bank. However, in better times, we believe the government would think twice about pushing such a package for relatively small banks,” S&P said.

Any delay in, or uncertainty about, the implementation of the resolution plan may roil the markets, S&P said.

“In our view, India’s financial sector broadly needs to raise governance standards and restore trust. In the past few years, regulators have identified many governance shortcomings among Indian lenders, most recently at Punjab and Maharashtra Cooperative (PMC) Bank Ltd,” S&P said.