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Fitch rating woes bite Indian banks

business Updated: Jun 20, 2012 20:25 IST
HT Correspondent

US credit rating agency Fitch on Wednesday cut its outlook of 11 financial institutions, including State Bank of India (SBI), ICICI Bank and Punjab National Bank (PNB) among others, from stable to negative.

The agency blamed the one-notch pull-down to the revision earlier this week of India's outlook to negative.

"The outlook revision of the financial institutions reflects their close linkages with the sovereign ( Indian government) by virtue of their high exposure to domestic counterparties and holdings of domestic sovereign ( government) debt," Fitch said in a statement.

Such outlook downgrades are usually caution signals for bond investors and banking customers need not worry.

The agency said that banks continue to have reasonable customer deposit base, domestic franchises and adequate capital.

"Fitch derives some comfort from the banks' reasonable customer deposit base, established domestic franchises and adequate capitalisation. The non-banks, however, lack the funding advantage, which puts them more at risk during times of increased market volatility," the statement said.

The downgraded entities include six government banks (including an international subsidiary of a government bank), two private banks, two wholly-owned government institutions and one infrastructure finance company.

The list includes Bank of Baroda, Bank of Baroda (New Zealand), Canara Bank, IDBI Bank, Axis Bank, Export-Import Bank of India, Housing and Urban Development Corporation Ltd, Infrastructure Development Finance Company Ltd, SBI, ICICI Bank and PNB.

On Monday, Fitch had downgraded India's credit outlook to "negative" from "stable" in a sign that the Indian government maybe on a dangerous course towards borrowing beyond its capacity to repay.

It had also revised its outlook on seven public sector undertakings to negative from stable including Rural Electrification Corp Ltd, Power Finance Corp Ltd, GAIL India Ltd, Indian Oil Corp Ltd, NTPC Ltd, NHPC Ltd and Steel Authority of India Ltd.