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Fitch places viability rating of IDBI Bank on Rating Watch Evolving

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Fitch places viability rating of IDBI Bank on Rating Watch Evolving

Fitch Ratings placed India-based IDBI Bank Ltd.'s viability rating of "ccc" on Rating Watch Evolving.

The rating agency said Dec. 14 that the action reflects the possibility that the lender's viability rating may change following a review prompted by the release of an exposure draft for Fitch's bank rating criteria.

The exposure draft introduced the use of "+" and "-" modifiers for the "ccc" rating category, Fitch said, adding, however, that it believes IDBI Bank's standalone creditworthiness could improve or deteriorate beyond the new modifier rating levels, depending on the lender's ability to meet its stated goals to restore capital to satisfactory levels.

An upgrade of the bank's viability rating by at least one notch, including to a higher rating category, is more probable than a downgrade by one notch or to "f'" given the progress seen thus far, the rating agency said.

Fitch noted that IDBI Bank's viability rating reflects a high degree of fundamental credit risk. The bank's other ratings are unaffected by the rating action.

The rating agency said that the bank's viability rating is sensitive to its ability to more permanently address its capital position. As such, Fitch added that it would likely downgrade the rating, potentially to "f," if the bank is less able to raise a significant portion of its capital needs, independent of the government.

Conversely, Fitch said it could upgrade the bank's viability rating by at least one notch, and even into the next rating category, if it demonstrates significant capital generation, coupled with government support.

Fitch plans to resolve the Rating Watch Evolving review after reviewing the lender's results for the full fiscal year ending March 31, 2018, or once details of a capital injection for the bank under the Indian government's recapitalization plan are finalized.