Moody’s cuts bank’s ratings

Moody’s Investors Service on Friday downgraded YES Bank’s rating following the RBI imposing a 30day moratorium that prevents the lender from making payment to its creditors. “The ratings remain under review, with the direction uncertain,” Moody’s said downgrading YES Bank’s long-term foreign currency issuer rating to Caa3 from B2. It has also downgraded the bank’s long-term foreign and local currency bank deposit ratings.

The downgrade “is a result of an event of default triggered by the RBI’S 30 - day moratorium,” the rating agency said in a statement.

“Despite the event of default, the Caa3 rating takes into account Moody’s expectation that although recovery rates for the banks’ senior creditors may be high given the close involvement of the Indian authorities and stated intention to resolve the bank quickly, the ultimate timing and form of eventual resolution remains uncertain.”

“Actions by the authorities to date have not reduced the probability of default as evidenced by the moratorium announcement, and highlights the continued uncertainty around private sector bank resolutions in India and the recovery prospects for senior creditors,” it said.

Moody’s said it expects a higher probability of low loss rate for depositors. “Moody’s expects high recovery prospects for the principal and interest on the bank’s deposits, as indicated by the final rating on those instruments.”