Fitch has cut the credit rating outlook on India’s nine PSU and private banks including SBI, PNB and ICICI Bank from “stable” to “negative” after the recent cut in India’s sovereign credit rating outlook.
Fitch has cut the credit rating outlook on India’s nine PSU and private banks including SBI, PNB and ICICI Bank from “stable” to “negative” after the recent cut in India’s sovereign credit rating outlook. Fitch said that all the banks are support-driven and anchored to their respective sovereign country rating. Other than State Bank of India and ICICI Bank, other lenders are EXIM Bank, Bank of Baroda, Bank of Baroda, Bank of India, Canara Bank, Punjab National Bank and Axis Bank. “They are based on Fitch’s assessment of high to moderate probability of extraordinary state support for these banks, which takes into account our assessment of the sovereign’s ability and propensity to provide extraordinary support,” it said in a statement on Sunday. However, the banks’ issuer default ratings, support ratings and support rating floors have been affirmed at their respective current levels.
State Bank of India has been assigned issuer default rating of “BBB-“. This reflects the rating agency’s expectation that the lender is highly likely to receive extraordinary state support, if required, as it holds high systemic importance. “SBI is the largest Indian bank with nearly 25% market share in system assets and deposits, it is 57.9% state-owned and has a much broader policy role than peers,” the agency said. On the other hand, ICICI Bank and Axis Bank have been assigned ratings of “BB+” each as the rating agency expects “a moderate probability of extraordinary state support for these banks, due to their systemic importance, market position and private ownership”. However, while there is a possibility that these two private banks will get extraordinary state support, the probability is lower compared to large state banks.
The coronavirus pandemic has caused the downgrade in India’s sovereign ratings as the government is under increasing pressure to provide support due to limited fiscal space and the significant deterioration in fiscal metrics. The agency had earlier downgraded India outlook to “negative” from “stable” as coronavirus continues to take toll on the country’s economy.