Financial Daily from THE HINDU group of publications
Tuesday, Sep 07, 2004
Financial Daily from THE HINDU group of publications Tuesday, Sep 07, 2004 |
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Money & Banking
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Credit Rating Crisil upgrades bonds rating of four PSBs Our Bureau
Mumbai , Sept. 6 THE rating agency Crisil has upgraded the bond ratings of four public sector banks - Bank of Baroda, Canara Bank, Indian Overseas Bank and Syndicate Bank. The upgrade reflects a reassessment of the Government support available to public sector banks, Crisil said in a release. The outlook on all the ratings is stable, despite hardening interest rates that could result in decrease in reported profits in FY 2004-05, the release said. The rating upgrades include Rs 600-crore bonds programme of Bank of Baroda and Rs 450 crore of Canara Bank (both from AA+ to AAA), three bond issues of Indian Overseas Bank aggregating Rs 450 crore and Rs 125 crore of Syndicate Bank (both from AA to AA+). According to Crisil, in the light of recent developments in the banking sector, there is greater evidence pointing to the sufficiency and timeliness of support from the Government. Looking ahead, with indications of trends towards consolidation amongst public sector banks, Crisil sees increased comfort on likely Government support, as banks grow even larger and potential fallouts of distress increase. While this benefits the credit profiles of all public sector banks, the impact on these four is sufficiently positive to merit an upgrade by one notch, the release said. Even distressed private sector banks have been, at times, rescued by the Government to protect depositors and creditors. Crisil believes that the Government's response would be stronger in the case of public sector banks, which typically have significant retail depositor bases and large work forces. Even public sector banks that had negative net worth have witnessed high deposit growth rates, indicating that the depositors see these as sovereign entities. The Government's support has been adequately demonstrated by repeated instances of large recapitalisation of public sector banks - a total of about Rs 23,000 crorre in the last 13 years. The fact that the Government has ensured that no public sector bank has even approached a liquidity crisis, continues to reinforce the public's perception of sovereign backing.
More Stories on : Credit Rating | Public Sector Banks
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