The US based credit ratings agency, Moody's downgraded the top three private sector banks in India namely ICICI Bank, HDFC Bank and Axis Bank. This comes as a growing concern over the macroeconomic conditions of the country.
Banks received a one notch downgrade on both stand alone and hybrid ratings. The standalone ratings fell from C- to D+. The lenders also saw a fall in hybrid ratings from Baa2 to Baa3, which is at borderline of non-investment grade.
Moody's in their reports mentioned the cause of revision in ratings is high reliance of Indian banking sector with the credit worthiness of the government; this is because of bank's high exposure to domestic sovereign debt.
"Our review indicated that there are little, if any, reasons to believe that these banks would be insulated from a government debt crisis," Moody's said. The rating agency pointed out that the banks have very high exposure to government bonds and securities with ICICI Bank, HDFC Bank, and Axis Bank holding 143%, 226%, and 239% of their tier 1 capital in sovereign debt.