By Shivam Saklani
Global credit rating agency
“Moody’s Investor Service” recently changed its reviews about 3 Indian banks
namely, “Bank of India”, “Union Bank”, “Oriental Bank of Commerce”.
Moody’s changed its rating from “negative”
to “stable” for these banks. Moody has also affirmed the standalone credit
profiles or baselines credit assessments at “ba3”.
The government’s 2.1 lakh crore
recapitalization (about which an article has also been published, a couple of
weeks ago is being seen as a major role player for this change.
The revision in ratings reflect
Moody’s view that the government’s capital infusion plan alleviates some of the
downside risks to their BCA or Baseline Credit Assessment, which is a part of
bank rating methodology and ratings.
Meanwhile, the ratings agency has
affirmed the Baa3/P-3 local and foreign currency bank deposit rating of the 3
Indian PSB. Furthermore Moody believes that the additional capital will help banks take
accelerated provisioning for their problem assets, which will in turn improve
their capacity to haircut on those assets, in a resolution process. It also
expects that some banks, now will be able to raise capital from equity markets
which will support capitalization profiles.