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Fitch Ratings Downgrades Indian Banks' Outlook to Negative Citing Centre's Dependence for Recapitalisation

Strategic Insights

— 1 min read

Fitch Ratings downgraded the outlook on nine Indian banks to negative, citing their high dependence on the Central government for recapitalisation. This move follows Fitch's revision of India's sovereign rating to negative due to the impact of the coronavirus pandemic on the country's economy. The affected banks include the Export-Import Bank of India, the State Bank of India, and others. Fitch affirmed IDBI Bank's IDR with a negative outlook, citing its support-driven rating. The negative outlook on India's sovereign rating reflects the government's limited fiscal space and the deterioration in fiscal metrics due to the pandemic.

Key Takeaways:

  • Fitch Ratings downgraded the outlook on nine Indian banks to negative, citing their high dependence on the Central government for recapitalisation.
  • The affected banks include the Export-Import Bank of India, the State Bank of India, the Bank of Baroda, ICICI Bank, and Axis Bank, among others.
  • Fitch affirmed IDBI Bank's IDR with a negative outlook, citing its support-driven rating.
  • The negative outlook on India's sovereign rating reflects the government's limited fiscal space and the deterioration in fiscal metrics due to the pandemic.
  • The rating actions follow Fitch's revision of the outlook on India's 'BBB-' rating to negative on June 18, due to the impact of the coronavirus pandemic.
  • Fitch has assessed high to moderate probability of extraordinary state support for these banks, taking into account the sovereign's ability and propensity to provide extraordinary support.
  • The negative outlook on India's sovereign rating reflects an increasing strain on the state's ability to provide extraordinary support due to the pandemic.

Statistics:

  • Nine Indian banks had their outlook downgraded to negative by Fitch Ratings.
  • These banks include the Export-Import Bank of India, the State Bank of India, the Bank of Baroda, the Bank of Baroda (New Zealand), the Bank of India, the Canara Bank, the Punjab National Bank, ICICI Bank, and Axis Bank Ltd.
  • Fitch has affirmed IDBI Bank Limited's IDR while maintaining the outlook at negative.
  • The rating action does not affect the banks' Viability Rating (VR), except for EXIM Bank.
  • EXIM Bank does not have a VR as its role as a policy bank makes an assessment of its standalone credit profile less meaningful.

Sources:

  • Fitch Ratings
  • "Fitch Revises India's Outlook to Negative; Affirms IDRs, Downgrades Long-Term IDRs on Nine Indian Banks", Sarkaritel, HT Digital Content Services.

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