In more trouble for the country’s private sector lenders, Fitch Ratings has downgraded the ratings of ICICI Bank and Axis Bank due to ‘challenges’ faced by them and lowering of India’s operating environment.

Fitch Ratings has downgraded ICICI Bank’s Long-Term Issuer Default Rating (IDR) to ‘BB+’ from ‘BBB-’ and its Viability Rating to ‘bb+’ from ‘bbb-’. The outlook on the IDR is Stable. Fitch has also affirmed ICICI Bank’s Support Rating at 3 and Support Rating Floor at ‘BB+’, it said in a statement late on Monday evening.

“The one notch downgrade ….belief that several of ICICI’s key financial indicators are generally weaker than those of banks rated higher by Fitch as well as many similarly Fitch-rated banks operating in environments broadly comparable with that facing Indian banks,” it said.

It also downgraded the Long-Term IDR and Viability Rating of Axis Bank to ‘BB+’ and ‘bb+’, respectively, from ‘BBB-’ and ‘bbb-’. The outlook is Stable. “Fitch has also affirmed Axis’ Support Rating and Support Rating Floor at 3 and ‘BB+’, respectively,” it further said.

Commenting on the rating downgrade, it further said it lowered its midpoint for India’s operating environment to ‘bb+’ from ‘bbb-’ following a review of the banking sector’s performance, particularly in the last three years, and its regulatory framework, as well as the outlook in the near-term.

Seemingly hopeful of a recovery in the banking sector, the rating agency said, “The performance of Indian banks should have largely bottomed out, but the sector is still struggling with poor asset quality and weak core capitalisation.”

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