Moody’s downgrades 4 public sector banks

Mayur.Shetty@timesgroup.com

Mumbai:

Rating agency

Moody’s has downgraded four public sector banks, citing the stress caused by the deepening

economic slowdown

on account of the coronavirus outbreak. The banks that have been downgraded are Bank of Baroda,

Bank of India

, Canara Bank and

Union Bank

.

The rating agency has downgraded the long-term local and foreign currency ratings of these banks to Ba1 from Baa3. At the same time, it has affirmed Punjab National Bank’s long-term local and foreign currency deposit ratings at Ba1.

“The economic shock from the coronavirus

pandemic

is exacerbating an already material slowdown in India’s economic growth, weakening borrowers’ credit profiles and hurting Indian banks’ asset quality. Prolonged financial stress among households, weak job creation and a credit crunch among non-bank financial companies will lead to a rise in non-performing loans, delaying the ongoing clean-up of banks’ balance sheets,”

Moody’s

said.

The banks’ Ba1 long-term local and foreign currency deposit ratings incorporate three-notches of uplift from their B1 to reflect Moody’s assumption of a very high probability of support from the government in times of need. Moody’s assumption takes into account the banks’ deposit market shares as well as their linkages with the government, including by way of ownership.