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The review was primarily based on the substantial strengthening of the country's external financial situation.

MUMBAI, Nov. 14

INTERNATIONAL rating agency Moody's Investors Service has placed India's Ba2 foreign currency country ceiling for debt and Ba3 foreign currency country ceiling for bank deposits on review for possible upgrade.

Bankers and analysts said this would have a positive impact on the Indian currency and corporates would be able to raise funds overseas at better rates.

Moody's said the review was primarily based on the substantial strengthening of the country's external financial situation.

The foreign currency issuer rating for the Republic of India - the proxy for the rating that would likely to be assigned were the Government to issue a foreign currency-denominated bond in the international capital markets - has also been placed on review for possible upgrade.

At present, however, the Government has no such bonds outstanding nor are there any rated government-guaranteed eurobonds outstanding.

The Ba2 domestic currency bond rating of the Government is not on review. In fact, the outlook on the Government's domestic currency bonds rating remains negative.

Moody's said that India's stronger external position had been achieved in spite of continued stress on public finances and last year's broad-based reduction in import tariffs. The current account had moved into a small surplus, thanks to good performance of both merchandise and service exports and surprisingly stable inflows of remittances from Indian workers living abroad.

In addition, the central bank's foreign exchange assets have climbed rapidly, reaching $61 billion in recent weeks, external debt and debt service ratios have declined to manageable levels, and short-term debt is negligible.

Reacting to the possible upgrade, the treasury head of a public sector bank said, "We see the currency strengthening further on the back of an upgrade, if it does happen. The rupee is likely to touch 48 to a dollar in the near future, if the central bank were to permit it."

Moody's said that its ongoing analysis of India was focused on whether the fiscal problems facing the government could spill over into a balance of payments crisis, a linkage that would limit the differential between the foreign and domestic currency ratings.

Mr Sharukh Wadia , treasury head , IndusInd Bank, said "an upgrade of the country's foreign currency rating is a positive sign , which could lead to more dollar inflows. The rupee is likely to appreciate further," he said.

"This will also mean finer rates for top tier corporates borrowing from overseas debt market," he said.

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