Home >industry >banking >Moody’s upgrades outlook for 12 PSUs to positive

Mumbai: Global rating agency Moody’s Investors Service on Thursday upgraded its outlook for 12 government-owned financial institutions to positive from stable in line with its revision of India’s sovereign credit rating outlook to positive.

The rating agency downgraded the ratings of three private sector banks citing the Indian government’s limited capacity to support these banks.

The outlook for Bank of Baroda, Bank of India, Canara Bank, Export Import Bank of India, Oriental Bank of Commerce, Indian Railway Financial Corp. Ltd, Power Finance Corp, Rural Electrification Corp. Ltd, Punjab National Bank, State Bank of India, Syndicate Bank and Union Bank of India was revised to positive.

The local currency and senior unsecured ratings of Axis Bank Ltd, HDFC Bank Ltd and ICICI Bank Ltd were cut to Baa3 from Baa2.

“The rating actions are in line with Moody’s affirmation of the government of India’s Baa3 issuer and senior unsecured ratings on 9 April 2015, and Moody’s changing of the sovereign’s ratings outlook to positive from stable on the same date," the rating agency said.

“The downgrade of the three private sector banks is driven by a change in Moody’s view that the capacity for government support is limited to a government’s bond rating, rather than Moody’s previous expectation that banks in India could benefit from additional support from other policy tools," Moody’s said.

The rating agency said that the improvement in the government’s own creditworthiness, as measured by its sovereign rating, has the potential to lift the supported ratings for the financial institutions.

“The assignment of a positive outlook on the sovereign’s and the financial institutions’ ratings signals a higher probability of the sovereign providing support to the financial institutions in times of stress."

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