The Hindu Business Line : Moody's rates most banks `stable'

The rankings of these banks have been raised from `negative' to `stable.' Moody's says that this is in line with the recent change of the foreign currency deposit-ceiling outlook for India.

The banks that have been upgraded include Bank of Baroda, Bank of India, Canara Bank, Central Bank of India, ICICI Bank, Oriental Bank of Commerce, Punjab National Bank, State Bank of India and Union Bank of India. "For most of the banks, rating upgrade is based on their stand alone financial strength, while for the weaker public sector banks government support is imputed in the ratings," said the report.

Moody's has also upgraded the rating on the $100-million global bond maturing in 2009 of Power Finance Corporation (PFC) and the $150-million eurobonds maturing 2004 of Industrial Development Bank of India (IDBI) as well as the foreign currency issuer rating of IFCI Ltd. `Stable' outlooks have been assigned to all three ratings.

According to Moody's, PFC has been playing an instrumental role in financing the development of the Indian power sector and has been able to establish a relatively profitable niche.

Although IDBI's financial position has been deteriorating, it has been prompt in meeting both local and foreign currency liabilities, said the report.

The upgrade of IFCI's foreign currency issuer rating is based solely on the likelihood of external Government support, due to its majority State ownership.

Though repeated losses in recent years have eroded IFCI's equity, direct and indirect government support has ensured the timely repayment of all foreign currency borrowings, despite IFCI defaulting to various institutional investors on its local currency liabilities, according to the report.

Speculating on the possible merger between IFCI and Punjab National Bank, Moody's has placed on review a possible downgrade of PNB's financial strength.

Moody's has also upgraded the financial strength rating (FSR) of Central Bank of India.

The upgrade reflects the consistent improvement in the bank's core profitability and asset quality in recent years.

These two factors, which were formerly somewhat weak, had been the main drivers exerting negative pressure on the bank's FSR, noted the report from Moody's.