Fitch revises outlook to ‘negative’ on IDRS of SBI, PNB, 7 others

Global rating agency Fitch on Monday revised the outlook on the long-term issuer default ratings (IDR) of nine Indian banks, from “stable” to “negative”, following a revision in the outlook on India rating (‘BBB-’). It affirmed its ratings on IDRS, support ratings (SRS), and support rating floors (SRFS).

The rating action covers — State Bank of India (SBI), Bank of Baroda (BOB), Bob’s subsidiary in New Zealand, Bank of India (BOI), Canara Bank (Canara), Punjab National Bank (PNB), ICICI Bank (ICICI), Axis Bank (Axis), and Export-import Bank of India (EXIM). IDRS for Indian banks are support-driven, and anchored to their respective SRFS. They are based on assessment of high-to-moderate probability of extraordinary state support for these banks. This takes into account the assessment of the sovereign’s ability, and propensity to provide extraordinary support, said Fitch in a statement.

The rating action does not affect the banks’ viability ratings (VRS). EXIM does not have a VR, given that its role as a policy bank makes an assessment of its stand-alone credit profile less significant.

On June 18, Fitch changed its outlook on India to ‘Negative’ from ‘Stable’ due to the impact of Covid on India’s economy.

The negative outlook on India reflects an increasing strain on the state’s ability to provide extraordinary support. The sovereign has limited fiscal space, and there has been significant deterioration in fiscal metrics due to challenges from the Covid pandemic, the rating agency added.