Mumbai: Global rating agency Moody’s Investors Services on Monday placed certain debt ratings of at least 11 Indian banks on a review for downgrade.
These include debt instruments of the country’s largest lender State Bank of India and its nearest competitor ICICI Bank Ltd, the rating agency said in a release.
The ratings have been put on a review in the context of a methodology update that has changed the way Moody’s looks at the probability of support, which has led to several sub-debt ratings in multiple banking systems being reviewed simultaneously, Moody’s said.
The agency has kept on review for downgrade the banks’ subordinated and junior subordinated debt ratings that have benefited from an uplift linked to Moody’s prior assessment of systemic support in India, the agency said.
Other banks, which are on the list include, include Axis Bank Ltd, Bank of Baroda, Bank of India, Canara Bank, HDFC Bank Ltd, IDBI Bank Ltd, Indian Overseas Bank, Syndicate Bank Ltd and Union Bank of India.
However, the rater clarified that the reviews of the banks’ sub-debt ratings are not related to any deterioration in the affected banks’ fundamental credit quality.
Moody’s said it expects to conclude its review within the next three months.
Moody’s explained that although the review for the downgrade has nothing to do with any observable deterioration in the credit quality of the banks, it needs to assess whether the government’s likely behaviour in times of stress has changed compared with previous assumptions.
However, its preliminary conclusion points to reasonable doubt over “whether the status quo would survive test cases where governments provide significant financial support to banks, particularly in a systemic crisis that puts stress on the government’s own balance sheet.”