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Moody's affirms ratings of 5 Indian banks, raises Punjab National Bank outlook

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Moody's affirms ratings of 5 Indian banks, raises Punjab National Bank outlook

Moody's on Sept. 4 said it revised the outlook on Punjab National Bank to positive from stable and affirmed the ratings of the bank and four other Indian public sector banks, days after the government announced plans to consolidate 10 public sector banks.

The rating agency affirmed the Baa3 long- and P-3 short-term local and foreign currency deposit ratings of Canara Bank, Oriental Bank of Commerce, Syndicate Bank Ltd. and Union Bank of India, as well as their baseline credit assessment and adjusted BCAs at "ba3." The outlooks on the four banks are maintained at stable.

Meanwhile, Moody's said it affirmed Punjab National Bank's Ba1 long-term and NP short-term local and foreign currency deposit ratings, as well as its baseline credit assessment and adjusted baseline credit assessment at "b1."

The ratings action comes after the Indian government announced four sets of mergers between 10 public sector banks. Moody's expects the mergers to be completed by April 1, 2020.

The government will also infuse a total of 383 billion rupees of capital into the affected banks: 160 billion rupees for Punjab National Bank, 117 billion rupees into Union Bank of India, 65 billion rupees into Canara Bank, 16 billion rupees into United Bank of India and 25 billion rupees into Indian Bank. The government plans to complete the capital injections over the next few months.

The rating agency noted that the affirmations reflect the expectation that the acquiring banks will receive ample capital injections to absorb potential write-downs, if any, arising from the merger. It also reflects Moody's assessment of a very high level of government support for Punjab National Bank, Canara Bank, Oriental Bank of Commerce, Syndicate Bank and Union Bank of India.

As of Sept. 4, US$1 was equivalent to 71.99 Indian rupees.