New Delhi: After downgrading India’s outlook to negative from stable, Fitch Ratings on Monday revised the outlook on nine Indian banks to negative. Also Read - India's Banking Sector Expected to Face Capital Shortfalls: Fitch
The outlook on the Long-Term Issuer Default Ratings (IDR) was revised to negative from stable due to the banks’ high dependence on the Centre to re-capitalise them. Also Read - ICICI Bank Sells 1.5% Stake in ICICI Prudential For Rs 840 Crore
Accordingly, the IDR outlook of the Export-Import Bank of India, the State Bank of India, the Bank of Baroda, the Bank of Baroda (New Zealand), the Bank of India, the Canara Bank, the Punjab National Bank, ICICI Bank and Axis Bank Ltd have been downgraded to negative. Also Read - Sensex Closing Bell: Markets End 376 Pts Higher Despite Indo-China Standoff; HDFC Twins, ICICI Bank Win Big
“At the same time, Fitch has affirmed IDBI Bank Limited’s (IDBI) IDR while maintaining the outlook at negative,” Fitch said in a statement.
The rating actions follow Fitch’s revision of the outlook on the ‘BBB-‘ rating on India to negative from stable on June 18, due to the impact of the escalating coronavirus pandemic on India’s economy.
“The IDRs for all the above Indian banks are support-driven and anchored to their respective SRFs,” the statement said.
“They are based on Fitch’s assessment of high to moderate probability of extraordinary state support for these banks, which takes into account our assessment of the sovereign’s ability and propensity to provide extraordinary support.”
According to the statement, the negative outlook on India’s sovereign rating reflects an increasing strain on the state’s ability to provide extraordinary support, due to the sovereign’s limited fiscal space and the significant deterioration in fiscal metrics due to challenges from the Covid-19 pandemic.
“The rating action does not affect the banks’ Viability Rating (VR). EXIM does not have a VR as its role as a policy bank makes an assessment of its standalone credit profile less meaningful.”