Moody's affirmed Punjab National Bank’s long-term local and foreign currency deposit ratings at “Ba1” and its BCA at “b1”. The rating outlook of PNB is changed to from “stable” to “positive”.
And finally, in the case of Central Bank of India and Indian Overseas Bank, Moody’s affirmed their long-term local and foreign currency deposit ratings at “Ba2” and their BCAs at “b2”. The rating outlook of both banks
has been maintained as stable.
Moody’s said factors like the rapid and widening spread of the coronavirus
outbreak, deteriorating global economic outlook, and asset price declines are creating a severe and extensive credit shock across sectors, regions and markets.
Referring regulatory and government efforts to face Covid-19 pandemic, Moody’s said stimulus measures announced by the Indian government and the RBI since the start of the outbreak will help mitigate some of the credit pressures.
But the longer and broader the economic slowdown, the more these banks
will face asset quality and profitability issues. At the same time, heightened liquidity stress at non-bank financial institutions will pose a risk to the stability of the broad financial system, given banks' large direct exposures to these entities.
The standalone credit profiles or BCAs of most rated public sector banks (PSBs) are expected to deteriorate as the economic shock will strain their already weak solvency. Also, in the absence of external capital support from the Indian government, the capitalization of the PSBs may deteriorate. Despite the near-term asset quality, profitability and capital strain, their funding and liquidity is expected to remain a key credit strength, it added.