Standard & Poor’s on Wednesday revised the outlook on long-term counterparty credit ratings for 11 Indian financial institutions, including Axis Bank, State Bank of India and ICICI Bank, from stable to negative.
The rating action follows downgrading of the outlook on India’s sovereign rating from stable to negative.
All banks carry a ‘BBB-’ rating. Other banks and financial institutions under rating include HDFC Bank, Union Bank of India, Bank of India and IDFC. S&P affirmed the long-term and short-term counterparty credit ratings and issue ratings on these financial institutions.
The banking industry country risk assessment score on India is unchanged at five. In March, S&P’s outlook for the Indian banking sector had said the operating performance of some banks was likely to remain weak in the year ending March 31, 2013. The asset quality of Indian banks is likely to remain weak, or even deteriorate, due to the moderation in economic activity, high inflation, and high interest rates, said the rating agency.
According to the report, credit growth in India was likely to weaken to 16-17 per cent in 2013. S&P said it expected net interest margins of the banks to remain tight in 2012-1313 due to intensifying competition and low credit growth, and borrowers’ limited ability to absorb higher interest rates.