Fitch has cut credit
rating outlook for 11 financial entities including State Bank of India (SBI), ICICI Bank, Punjab National Bank (PNB) and Axis Bank.
The credit rating agency announced the revision of the outlook on the 'BBB-' Long-Term (LT) Foreign Currency (FC) Issuer Default Rating (IDR) of 11 Indian financial institutions to negative from stable.
The rating action follows
Fitch's revision of the outlook on India's LT Foreign- and Local-Currency IDRs to negative from stable on Monday.
The financial institutions comprise of six government banks (including an international banking subsidiary of a government bank), two private banks, two wholly owned government institutions and one infrastructure finance
company, the rating agency said in a statement.
EDITOR'S TAKE: Why India needs to get its act togetherThe institutions that are affected by the revision are: SBI, PNB, Bank of Baroda, Bank of Baroda (New Zealand), Canara Bank, IDBI Bank, ICICI Bank, Axis Bank, Export-Import Bank of India, Housing and Urban Development Corp (HUDCO) and Infrastructure Development Finance Co Ltd (IDFC).
"The outlook
revision of the financial institutions reflects their close linkages with the sovereign by virtue of their high exposure to domestic counterparties and holdings of domestic sovereign debt," Fitch said.
FROM THE MAGAZINE: Need to change negative perception about India: Anand SharmaShould the Sovereign Long-Term IDR be downgraded, the banks with Viability Ratings (VR) of 'bbb-' would also be affected given the previously mentioned linkages.
Fitch is also of the opinion that pressures are building generally on the stand-alone credit profile of these institutions which will negatively impact VRs, given India's weakening economic and fiscal outlook, slowing business reforms and inflationary pressures that in turn could put further pressure on their future asset quality.
FROM THE MAGAZINE: India Inc takes a breather to counter slowdown According to Fitch, there is some comfort from the banks' reasonable customer deposit base, established domestic franchises and adequate capitalisation.
"The non-banks, however, lack the funding advantage, which puts them more at risk during times of increased market volatility," Fitch said.
"In the agency's opinion, sovereign support for both the large banks and policy-type institutions is expected to remain strong, with the former benefiting from their large share of system assets and deposits and the latter from their association with the government," the rating agency added.
With IANS inputs
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