Better rating for banks, companies

Standard & Poor's today upgraded the long-term foreign currency rating of Industrial Development Bank of India (IDBI) to "BB+" from "BB" and also raised the outlook of IDBI and four other banks to positive from stable.

The other banks which have seen their outlook raised are State Bank of India, ICICI Bank, Bank of India and Indian Overseas Bank. The raising of the outlooks follows a similar revision in the outlook on India.

S&P also raised the outlook of Indian Oil Corporation, National Thermal Power Corporation and National Hydroelectric Power Corporation to positive from stable.

S&P said the 'BB+' long-term foreign currency rating on IDBI factors in the expected extraordinary support from the government if the bank faces distress.

The government's dealings with IDBI since its October 2004 restructuring have indicated the government remains committed to having IDBI play a quasi-policy role in long-term development projects.

IDBI has demonstrated, although with government assistance, that it has been able to build a sustainable commercial franchise after the restructuring.

Standard & Poors expects IDBI to continue its improvement trajectory in the medium term.

"The outlook revision on these bank ratings reflects their improving stand-alone profiles against the backdrop of a better operating environment," said S&P's credit analyst Nandini Vijayaraghavan.

"The banks' stand-alone profiles are also expected to be partially strengthened by the better quality in their asset books, given the government bonds they hold," she pointed out.