By IANS,
Mumbai : Global ratings agency Standard & Poor’s Wednesday cut its outlook to negative from stable on 11 financial institutions, including the top three banks State Bank of India, ICICI Bank and HDFC Bank, to negative from stable, but kept their ratings unchanged.
The country’s largest lender State Bank of India’s ratings is kept unchanged at BBB(-) with outlook being lowered to negative from stable.
The outlook on ICICI Bank, HDFC Bank, Axis Bank, Bank of India, IDBI Bank, Indian Overseas Bank, Indian Bank, Union Bank of India, Syndicate Bank and Infrastructure Development Finance Company are also lowered to negative.
All these lenders have the lowest investment grade ratings of BBB(-), the same as India’s sovereign ratings.
The ratings agency has also lowered its outlook on India’s long-term sovereign debt ratings to negative from stable keeping the rating unchanged at BBB(-).
The negative outlooks on the 11 institutions reflect the outlook on the sovereign credit rating on India, the ratings agency said.
“We could lower the ratings on these financial institutions if, we lower the sovereign rating; or the stand-alone credit profiles of these financial institutions deteriorate sharply,” S&P said, adding that such deterioration was unlikely in most cases.
“We could revise the outlook to stable if we take a similar action on the sovereign rating,” it said.
The agency also lowered its outlook to negative for four state-run finance companies — Exim Bank of India, India Infrastructure Finance Co, Indian Railway Finance Corp and Power Finance Corp.
It revised outlook on three Indian government-related entities (GREs), NTPC, SAIL and NHPC, to negative from stable.
The agency said the same rating of banks and sovereign credit because of direct and indirect influence that the sovereign in distress would have on a bank’s operations, including its ability to service foreign currency obligations.
It is also the same because banks operate under government regulations, invest significant sum in government bonds and a large part of their revenue comes from government-owned domestic companies.