ICICI, 2 other banks on Moody's notice for possible downgrade

Moody's has also placed Life Insurance Corporation of India under review for possible downgrade

Global agency Moody's today placed credit ratings of leading private sector banks, ICICI Banks, HDFC Bank and Axis Bank, on watch for a possible downgrade within three months.

Moody's Investors Service said it has placed on review for downgrade three banks in India (ICICI Banks, HDFC Bank and Axis Bank), whose standalone credit assessments are currently positioned above India's sovereign debt rating.

The announcement reflects Moody's revised assessment of the linkage between the credit profiles of sovereigns and financial institutions globally.

"Consistent with this guidance, 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 Investors Service said adding "Moody's expects to conclude the reviews within approximately three months".

In its reaction, ICICI Bank's spokesperson said: "The rating action by Moody's is not a change in the sovereign rating of India and not affect ratings of any instrument issued by ICICI bank (bonds or deposits).

"Our ALM (Asset Liability Management) is well matched with asset repayments in FY 2013 broadly covering our bond and loan repayment obligations. We do not need to access bond markets for refinance. We will look at accessing the markets to raise funds for new lending depending on the cost and the rates at which we can deploy the funds," ICICI said.

Moody's has also placed the insurance financial strength rating of Life Insurance Corporation of India (LIC) under review for possible downgrade.

The announcements come close on the heels of lowering of rating outlook of 11 financial institutions, including these three private banks, by Standard and Poor's.

All the three banks have 'baa2' foreign currency long-term ratings from Moody's, which reflects medium-grade investment rating with some speculative elements and moderate credit risk.

Another statement said that "Moody's has placed the insurance financial strength rating of Life Insurance Corporation of India (LIC) (Baa2/stable) under review for possible downgrade".