Moody's may downgrade India's three top private lenders

Mumbai, April 30 (IANS) Global ratings agency Moody's Investors Service said Monday it has placed on review India's three top private sector lenders ICICI Bank, HDFC Bank and Axis Bank for possible downgrade.

The review is mainly because of lower sovereign ratings of India.

Standalone credit assessment ratings of these lenders are currently positioned above India's sovereign debt rating.

"Moody's expects to position the standalone credit assessments of most banks globally at (or below) the rating of the sovereign where the bank is domiciled," Moody's said in a report.

The review is expected to be concluded in three months.

All the three lenders enjoy Baa2 foreign currency long-term ratings from Moody's. This is a medium grade rating and shows that these companies have acceptable ability to repay short-term debt.

Ratings agency Standard & Poor's last week cut its outlook to negative from stable on India's sovereign ratings and leading lenders including ICICI Bank, HDFC Bank, and Axis Bank.

A downgrade in rating means that the government or companies are less capable to meet their debt obligations. This results in higher cost to borrowings. Also it becomes difficult for the firms and the government to raise money from overseas markets.

Moody's said during the review it will assess the degree to which the company's standalone credit profile is correlated with that of the sovereign.

The reviews will take into account (i) the extent to which the banks' business depends on the domestic macroeconomic and financial environment; (ii) the degree of reliance on market-based, and therefore more confidence-sensitive, funding; and (iii) direct or indirect exposures to domestic sovereign debt, compared with their capital bases, it said.