Fitch Ratings today revised the outlook on eight banks and three financial institutions to ‘negative’ from ‘stable’, while affirming the rating. Fitch said there could be further pressure on banks’ future asset quality, given India’s weakening economic and fiscal outlook, slowing business reforms and inflationary pressures.
However, the markets ignored the revision as the Bank Nifty gained 0.46 per cent while Bankex was up 0.42 per cent at market close.
The revision on the ‘BBB-’ Long-Term (LT) Foreign Currency (FC) Issuer Default Rating (IDR) of India-based financial institutions includes six public sector banks — State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank, Export-Import Bank of India (EXIM), and a foreign subsidiary of Bank of Baroda (New Zealand).
The revision in outlook also includes two leading private sector lenders — ICICI Bank and Axis Bank.
The agency also revised its outlook on Infrastructure Development Finance Company Ltd (IDFC) and two wholly-owned Government institutions — Housing and Urban Development Corporation Ltd and Indian Railway Finance Corporation Ltd. Fitch withdrew the ‘BBB-(exp)’ rating for IRFC as it reduced its plan size of $300-million bond proposed in FY12.
The revision follows the downgrade of outlook for India by the same agency from ‘stable’ to ‘negative’ on Monday.
Dr Rupa Rege Nitsure, Chief Economist, Bank of Baroda, 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.”
She added, “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.”