Global ratings agency, Fitch Ratings, has cut the credit rating outlook of eight Indian banks and three Indian financial institutions. The outlook, which was earlier ‘stable', has been cut to ‘negative'.
In a statement, Fitch said that "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." It added that in India's present economic system, which is weak due to inflationary pressures and in dire need of business reforms, the bank's asset quality could further deteriorate.
The banks which have been downgraded include - Bank of Baroda, a foreign subsidiary of the same bank Bank of Baroda (New Zealand), the country's lagest lender State Bank of India, Kerala based Canara Bank, Punjab National Bank, Export-Import Bank of India (EXIM), the country's two largest private sector banks, ICICI Bank and Axis Bank.
The agency also downgraded three Indian financial institutions, two of which are government owned - Housing and Urban Development Corporation Ltd and Indian Railway Finance Corporation Ltd, and an infrastructure finance company - Infrastructure Development Finance Company Ltd (IDFC).
Talking on this matter, Dr Rupa Rege Nitsure said, "It is event-driven and does not indicate any bank-specific concerns. This happens for all banks and FIs rated by Fitch for their bond issuances" and went on to add, "The Fitch action will not affect our fund raising plans or terms of finance as investors have shown confidence with BoB's stock gaining 1.39 per cent today." Dr. Nitsure is the Chief Economist of Bank of Baroda.