Fitch Ratings on Monday lowered its rating outlook on nine banks, including SBI, PNB and ICICI Bank, to negative from stable, following its lowering of India’s sovereign rating outlook because of the impact of the pandemic.

Earlier this month, Moody’s downgraded the long-term local and foreign-currency issuer ratings of four Indian banks, including SBI and HDFC Bank. Moody’s had raised the rating outlook of PNB to positive from stable.

Besides SBI, PNB and ICICI Bank, Fitch revised the outlook for Export-Import Bank of India (Exim), Bank of Baroda, Bank of Baroda (New Zealand), Bank of India, Canara Bank, and Axis Bank while affirming their ratings.

At the same time, Fitch has affirmed IDBI Bank Ltd’s rating, while maintaining the outlook at negative.

The rating actions follow Fitch’s revision of the outlook on the “BBB-” rating on India to negative from stable on June 18, 2020 because of the impact of the escalating coronavirus pandemic on India's economy, Fitch said .

The ratings of all the nine Indian banks are support-driven and anchored to their sovereign country rating.

“They are based on Fitch’s assessment of high to moderate probability of extraordinary state support for these banks, which takes into account our assessment of the sovereign’s ability and propensity to provide extraordinary support,” Fitch said.

Negative growth

Moody’s Investors Service on Monday projected the Indian economy to shrink 3.1 per cent in 2020 and said clashes with China on the border also suggest rising geopolitical risks in the Asian region.

In April, Moody’s had put growth for the year at 0.2 per cent. Moody’s in May had projected zero growth for 2020-21.

Fitch said the ongoing border tensions with China did not immediately impact India’s credit profile, but may distract the government from implementing reforms. It also felt that India is very likely to come out with another round of fiscal stimulus package, worth about 1 per cent of GDP in the coming months.

Fitch Ratings director (sovereign ratings) Thomas Rookmaaker said at a webinar that the government has announced reforms to improve growth and a strong GDP growth is important to cut down public debt.

Moody’s Investors Service on Monday projected the Indian economy to shrink 3.1 per cent in 2020 and said clashes with China on the border also suggest rising geopolitical risks in the Asian region where countries are particularly vulnerable to changes in geopolitical dynamics. In April Moody’s had put growth for the year at 0.2 per cent. Moody’s in May had projected zero growth for fiscal year 2020-21 ending March.

While it pegged India's annual growth at 0.2 per cent in April, the forecast has been sharply revised after taking into consideration the disruptions due to the coronavirus pandemic.

However, Moody's expects the economy to register 6.9 per cent growth in 2021.