Moody's, the global credit rating agency, has placed some debt ratings of 11 banks, including State Bank of India (SBI), ICICI Bank, HDFC Bank and Axis Bank, under review because of the updating of its methodology.
Other banks are Bank of Baroda, Bank of India, Canara Bank, IDBI Bank, Indian Overseas Bank, Syndicate Bank and Union Bank of India.
"The review takes place in the context of a methodology update that has changed the way Moody's looks at the probability of support, which has led to several subdebt ratings in multiple banking systems being reviewed simultaneously," the rating agency said.
Moody's also noted debts of those banks were placed under review that had benefited from an uplift linked to Moody's prior assessment of systemic support in the country.
However, the agency noted that the reviews of these banks' sub-debt ratings were not indication of any change in the affected banks' fundamental credit quality.
"The reviews of the banks' subdebt ratings are not in any way related to any deterioration in the affected banks' fundamental credit quality," Moody's Investors Services said, but added that it needs to assess whether the government's likely behaviour in times of stress has changed compared to previous assumptions.
Moody's also noted that its preliminary conclusion points to reasonable doubt over whether the status quo would survive test cases where governments provide significant financial support to banks, particularly in a systemic crisis that puts stress on the government's own balance sheet.
Moody's expects to conclude its review within the next three months.
The market did not react badly to the report and the Bankex was down just 50 bps against the broader market which was down nearly double the index.
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