Moody's has upgraded its credit rating on short-term deposits in foreign currency from speculative to investment grade.
Such an upgrade will help banks to attract foreign currency deposits. The upgrade is in line with the rating revision in three other instruments, which were all placed in a higher category by the rating agency on December 20.
According to the India's external debt position, short-term external liabilities for commercial banks have come down from $860 million to $763 million as of end September 2011.
This amount was $898 million at the end of March 2011. The numbers highlight the increased withdrawals from foreign currency accounts.
‘Not prime' to ‘P3'
A Finance Ministry statement said that the short-term country ceiling on foreign currency bank deposits has been increased from ‘Not Prime (NP)' to ‘P-3'. P-3 denotes prime and such a rating indicates acceptable ability to repay short-term obligations.
Short-term here means deposits with maturities up to one year.Moody's had last month upgraded the ratings on long-term government bonds denominated in domestic currency from ‘Ba1' to ‘Baa3', or from speculative to investment grade.
Besides, the long-term country ceiling on the foreign currency bank deposits was also upgraded from ‘Ba1' to ‘Baa3'.
Sound fundamentals
Reacting to the developments, Mr Thomas Mathew, Joint Secretary in the Capital Market Division of the Finance Ministry, said: “When others assess us as good, it is our responsibility to see what is good for us. We should universally celebrate what the rating agency has done and aim to go further.”
He also said that the Department of Economic Affairs (DEA) will continue to engage rating agencies on a regular basis to impress upon them the long-term structural strengths and sound fundamentals of the Indian economy. Currently, six sovereign ratings agencies — Standard & Poor's, Moody's, DBRS, Fitch, Japanese Credit Rating Agency, and the Rating and Investment Information Inc — assign ratings to India.
Shishir.s@thehindu.co.in