Moody's downgrades IOB, Central Bank

Global rating agency Moody’s has downgraded ratings for two public sector lenders, Indian Overseas Bank and Central Bank of India, Ba3 from Ba1.

It affirmed ratings of nine banks, including Bank of India, Punjab National Bank and Axis Bank, at Baa3/Prime-3. Other banks whose rating was affirmed were Bank of Baroda, Canara Bank, Oriental Bank of Commerce, Syndicate Bank, Union Bank of India and ICICI Bank.

It also downgraded the baseline credit assessments (BCAs) and adjusted BCAs of Axis and ICICI to ba1 from baa3.

“We continue to position the rated public sector banks in the ‘very high’ government support bucket, reflecting the systemic importance of public sector banks in the country,” Moody’s said in a report.

For Axis Bank and ICICI Bank, the agency said it expects the pace of bad loan formation to decline materially from the very high levels seen in fiscal 2017 but to still remain elevated.

“Both banks remain exposed to weak corporates that have not yet been classified as NPLs, thus representing a potential source of asset quality stress,” the report said.