Narendra Modi govt boost for PSU banks, Fitch says rating outlook stable

Jun 15 2014, 13:14 IST
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The macroeconomic and political risks have abated in the country since the election of a new government with a decisive mandate. Reuters The macroeconomic and political risks have abated in the country since the election of a new government with a decisive mandate. Reuters
SummaryA strong Narendra Modi government at the Centre and stability in macro economic factors...

A strong Narendra Modi government at the Centre and stability in macro economic factors are likely to keep rating outlook of the country's public sector banks stable for some time, says a report by rating agency Fitch.

The macroeconomic and political risks have abated in the country since the election of a new government with a decisive mandate, the report said.

"That may have contained further downside risks, while it will take time to achieve a full recovery for the economy and the banks; therefore, rating outlooks (for state-run banks) are likely to remain stable for now," it said.

The appointment of Narendra Modi-led BJP government has improved investors sentiments and the key benchmark indices surged to record levels.

Post the election, the BSE Sensex crossed 25,000 mark, while Nifty touched the 7,500 mark.

The state-owned banks have been the most affected, in terms of rise in their non-performing assets, by the economic slowdown since 2011 and exposure to problematic infrastructure sector.

All government banks' Viability Ratings, with the exception of State Bank of India, have been downgraded over the last one to two years to the 'bb' category.

However, Fitch said the long term rating of PSU bank continue to be at 'BBB-'.

"The long-term ratings of the major government banks continue to be the same as that of the country's sovereign, at 'BBB-', thanks to expectations of extraordinary government support for senior creditors," the rating agency added.

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