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New Delhi, Jun 2 () The downgrade of India's sovereign rating by Moody's has not come as a surprise as global rating agencies have lowered ratings and outlook of about 21 emerging economies following COVID-19 outbreak, SBI said in a report on Tuesday. India's sovereign rating was downgraded by Moody's to Baa3 with a negative outlook on the pretext of prolonged period of slower growth, rising debt and stress in financial system. Apart from sovereign rating downgrade, Moody's has taken rating actions on 11 Indian banks. "...It seems that the downgrade was not completely unexpected. This is clearly visible in the data that market is not yet impacted by the rating downgrade. BSE Sensex and NSE Nifty rose and even Rupee appreciated against the US Dollar. "...India has not been alone to witness rating downgrade. So far around 21 emerging and developing countries have registered either a rating and/ or outlook downgrade by the agency. This does not come as a total surprise as emerging markets are always more susceptible to rating downgrades compared to developed economies in times of stress even if some of them have very low debt to GDP ratio," SBI in its research report 'Ecowrap' said. The rating action, the report said, was no reflection on the ability of the Indian government to service its debt obligations. "The sovereign external debt comprises around 20 per cent of the total external debt. The current level of foreign exchange reserves are sufficient to meet any debt obligations," the report added. The downgrade was unlikely to result in any immediate repercussions on exchange rates and bond spreads immediately on India offshore bonds, the report said, adding "...we need to be careful that we remain in investment grade and continue to give growth a big push through policy measures". It further said that in the current situation in India both the key interest rate and GDP are expected to fall further. "Our nominal GDP growth is likely to contract and based on this our interest-growth differential may turn positive also. Further, if interest rates are higher than expected, then the cost of rolling over a given debt increases," the report said. There have been studies which show that if the difference between interest rate and nominal growth rate is negative then there is no level of debt which is unsustainable, i.e. the government can borrow easily. The report also suggested that the government should only think of such interest-growth differential and not slippage in fiscal deficit. NKD CS BAL

Moody's rating downgrade not surprising: SBI report

Mumbai, Apr 30 () Fitch Ratings on Thursday downgraded the viability ratings (VR) of State Bank of India (SBI), ICICI Bank and Axis Bank to 'bb' from 'bb+' on account of deteriorating operating environment for banks amid the COVID-19 pandemic. The global rating agency also downgraded Bank of Baroda's (BOB) VR by one notch to 'bb-', from 'bb'. The agency affirmed the long-term issuer default ratings (IDR) of SBI and BOB at 'BBB-' and those of ICICI Bank and Axis Bank at 'BB+'. The outlook for all the four banks has been kept as stable. "The rating actions are driven by rapid deterioration in the operating environment for banks in the country following the coronavirus pandemic and measures to contain its spread," the agency said. For SBI and BOB, the VR downgrades reflect the heightened risks that weakening asset quality will pose to their less-than-satisfactory loss-absorption buffers. "We expect SBI's and BOB's financial performances to worsen, although their asset-quality problems may not materialise until the effects of the 90-day regulatory moratorium on impaired loans recognition wear off," it said. The VR downgrades of ICICI Bank and Axis Bank highlight heightened risks to their asset qualities and earnings from the disruption in business and consumer activity, which the rating agency expects to continue well beyond the lockdown in the country. Besides these banks, the rating agency also affirmed IDRs of Punjab National Bank (PNB), Bank of India (BOI) and Canara Bank at 'BBB-', with stable outlooks. The viability rating of PNB has been affirmed at 'b' and that of Canara Bank at 'bb-'. HV RVK

COVID-19: Fitch downgrades viability ratings of SBI, BoB, ICICI, Axis Bank

Mumbai, Jun 23 () Domestic rating agency Icra on Tuesday downgraded the rating on certain bonds of Yes Bank, days after RBI restrained the lender from making repayments to bondholders on account of capital being below the mandated levels. The rating on six Basel-II compliant upper tier II bonds totalling up to Rs 32,611 crore have been downgraded to 'D', according to a statement. RBI had refused to accede to a bank's request to pay the interest on the bonds issued in 2012 due on June 29 because of the low capital levels. The bank, which is preparing for raising capital at present, had asserted that it has sufficient liquidity to meet all requirements. "The timely servicing of the upcoming coupon, which is cumulative in nature remains constrained and the same is likely to be paid only when the bank achieves a CRAR of 9.0 per cent," Icra said. The latest rating also take into account the reported net loss of Rs 16,418 crore in FY20 and the CRAR of 8.50 per cent as on March 31, despite the sizeable capital infusion by new shareholders and the write-down of the Additional Tier I (AT-I) bonds in Q4 FY20, it added. CRAR is Capital to Risk Weighted Assets Ratio (CRAR). The rating agency also acknowledged that Yes Bank is at "advanced stages" of raising the capital but the same is unlikely to be concluded before June 29. Further, the rating also factors in the likelihood of high credit costs owing to the weak operating environment coupled with the high overdue advances (Special Mention Accounts) that stood at 7 per cent of the standard advances as of March. The support from SBI and other lenders, who poured in Rs 10,000 crore for the bailout, is a key credit strength while ability to raise deposits, large capital requirements and likely pressures on operating profits are among the challenges, as per Icra. Yes Bank shares closed 0.54 per cent down at Rs 27.60 apiece on the BSE on Tuesday as against gains of 1.49 per cent on the benchmark. AA RAM

Icra downgrades rating on certain Yes Bank bonds

A day after India's sovereign rating downgraded, Moody's Investors Service on Tuesday cut ratings of eight non-financial companies, including <keyword id="6354512" type="COMPANY" weightage="20" keywordseo="Infosys">Infosys</keyword>, <keyword id="6357150" type="DOMAIN" weightage="20" keywordseo="tcs">TCS</keyword>, ONGC, and three banks SBI, HDFC Bank and EXIM. It also downgraded seven Indian infrastructure issuers, including NTPC, NHAI, GAIL and Adani Green Energy Restricted Group, by one notch. Issuer ratings of IRFC and HUDCO have also been lowered. Moody's said the economic disruption caused by the coronavirus pandemic and the downgrade of the sovereign rating are the key drivers for Tuesday's rating actions. On Monday, Moody's had downgraded India's sovereign rating for the first time in 22 years by a notch to 'Baa3', which is the lowest investment grade -- just a notch above junk status. Accordingly, the long-term issuer ratings of eight non-financial companies -- Oil and Natural Gas Corporation, Hindustan Petroleum Corporation Ltd, Oil India Ltd, <keyword id="6356834" type="COMPANY" weightage="20" keywordseo="indian-oil-corporation">Indian Oil Corporation</keyword> Ltd, Bharat Petroleum Corporation Ltd, Petronet LNG, Tata Consultancy Services (TCS) and Infosys -- have been downgraded. The outlooks on all these ratings are negative. However, Moody's affirmed the issuer rating of Reliance Industries but revised the outlook to negative from stable. With regard to ratings of banks, Moody's has downgraded the long-term local and foreign currency deposit ratings of HDFC Bank and SBI to Baa3 from Baa2, and the long-term issuer rating of EXIM India to Baa3 from Baa2, with negative outlook. The deposit ratings of these banks are at the same level as India's Baa3 sovereign rating. Consequently, Moody's has downgraded HDFC Bank's baseline credit assessment (BCA) to baa3 from baa2. Moody's has placed the Baa3 long-term local and foreign currency deposit ratings of <keyword id="6358007" type="DOMAIN" weightage="20" keywordseo="bank-of-baroda">Bank of Baroda</keyword>, Bank of India, <keyword id="6357132" type="COMPANY" weightage="20" keywordseo="Canara-Bank">Canara Bank</keyword> and <keyword id="63524" type="DOMAIN" weightage="20" keywordseo="Union-Bank-of-India">Union Bank of India</keyword> and their BCAs under review for downgrade. Moody's has downgraded IndusInd's long-term local and foreign currency deposit ratings, with a negative outlook. JD HRS

Moody's downgrades ratings of 8 firms including Infosys, TCS and ONGC

Kolkata, Jun 18 () State Bank of India (SBI) chairman Rajnish Kumar on Thursday said that there is enough liquidity available in the system and also interest rates have moderated to a large extent. Speaking at a webinar organised by Bharat Chamber of Commerce, Kumar said that both the RBI and the government have taken measures to bring back the economy, derailed by the pandemic, back on track. "The government and the RBI have taken measures to bring back the economy to the path of revival", he said. Kumar said the RBI has been giving calibrated responses quickly and ensured that there is enough liquidity in the system. According to him, interest rates have also moderated to a large extent. He said that government has taken steps to make direct bank transfers, a lot of emphasis on helping the MSMEs and announced reforms in the areas of agriculture, defence and mining for creating a favourable investment climate. "I believe the situation is returning to normal and many businesses are back to normal operating at 70 to 80 per cent capacity. Some of them have also started exports", he said. According to him, the rural economy will play a critical role in the revival process. The aviation, tourism, hospitality, services and construction sectors are the most affected, while agriculture is the least, Kumar said. Regarding the Supreme Court's observation on moratorium on loans that banks are charging 'interest on interest', Kumar said SBI has filed an application for intervention along with IBA. "The matter is sub-judice and better to wait till August", he said. Kumar also said that SBI is not charging higher interest rates for ratings downgrade. He said, "we cannot imagine post-COVID situation at the moment and also don't know when it will come." According to him, SBI's liquidity ratio of 143 per cent is not an indicator of the fact that the bank is not lending. Regarding SBI, he said that the bank has sanctioned loan applications of two lakh MSMEs under the guarantee emergency credit line. The MSMEs are managing this crisis very well, he said, adding that reassessment of working capital is going on. dc RG RG RG

Plenty of liquidity available in the system: SBI chairman

<ul><li>Ratings agency <keyword id="6354972" type="COMPANY" weightage="20" keywordseo="icra">ICRA</keyword> said that it has downgraded <keyword id="6358200" type="COMPANY" weightage="20" keywordseo="jet-airways">Jet Airways</keyword>’ borrowing programme, comprising long and short-term debts of around ₹109.6 billion, to a “D” classification, implying a high risk of default. </li><li>In a stock exchange filing on the last day of 2018, Jet Airways announced that it had defaulted on principal and interest payments to a group of lenders led by the State Bank of India (SBI). </li><li>Prior to this, Jet Airways had failed to raise a loan of around ₹15 billion from SBI to meet its maturing <keyword id="44647" type="ORGANIZATION" weightage="20" keywordseo="debt">debt</keyword> and working capital obligations in the immediate term. </li><li>All of this further jeopardises Goyal’s plan to retain control of the <keyword id="34984" type="ORGANIZATION" weightage="20" keywordseo="airline">airline</keyword> after raising fresh funds. </li></ul>After a particularly testy 2018, <keyword id="122732" type="PERSON" weightage="20" keywordseo="Naresh-Goyal">Naresh Goyal</keyword>, the owner of cash-strapped airline Jet Airways, would have been looking to begin 2019 on a different note. However, that wasn’t to be. On Wednesday, ICRA, a domestic ratings agency, said that it had <a href="https://www.icra.in/Rationale/ShowRationaleReport/?Id=76249">downgraded </a>Jet Airways’ borrowing programme, comprising long and short-term debts of around ₹109.6 billion, to a “D” classification, implying a high risk of default. The downgrade, which was Jet Airways’ <a href="https://www.thehindubusinessline.com/economy/logistics/jet-airways-downgraded-again-by-icra/article25697586.ece">fifth </a>in the past two years, followed a loan default by the airline two days prior. In a stock exchange filing on the last day of 2018, Jet Airways announced that it had defaulted on principal and interest payments to a group of lenders led by the State Bank of India (SBI) - the first time it had defaulted. In a bid to downplay worries, India’s second-largest airline said that this was due to a “temporary cash flow mismatch.” More accurately, Jet Airways had failed to raise a loan of around <a href="https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/jet-airways-in-talks-with-sbi-for-rs-1500-crore-loan/articleshow/67313059.cms">₹15 billion </a>from the State Bank of India (SBI) to meet its maturing debt and working capital obligations in the immediate term. The bank had reportedly told the airline’s owners that they needed to infuse more cash into the company. The airline has been unable to pay its employees and some of its vendors. Like some of its rivals in the Indian <keyword id="31907" type="COMPANY" weightage="20" keywordseo="Aviation">aviation</keyword> sector, it has been dealing with liquidity issues, high debt levels and a series of operating losses. While it has implemented a number of initiatives to cut costs and raise cash, such as the renegotiation of maintenance contracts and the sale and leaseback of aircrafts, its financial health depends on a sustained reduction in the prices of jet <keyword id="4869" type="PERSON" weightage="20" keywordseo="Fuel">fuel</keyword>. All of this further jeopardises Goyal’s plan to retain control of the airline after raising fresh funds. He had been trying to court partner Etihad Airlines, which has a 24% holding, <a href="https://www.businessinsider.in/the-owner-of-jet-airways-is-reportedly-trying-to-secure-a-rescue-deal-with-partner-etihad-to-avoid-losing-control-of-his-struggling-airline/articleshow/66808564.cms">to increase its stake in Jet</a> Airways as opposed to an outright purchase by Tata which would havely likely seen him unable to retain even a minority shareholding. While the deal is yet to come to fruition, Etihad has agreed to be a <a href="https://www.livemint.com/Companies/mN80yrVCyo7VLuRQJoldKJ/Jet-Airways-seeks-350-million-soft-loan-from-Etihad.html">guarantor for Jet Airways’ fresh loans</a>. This is, of course, contingent on Jet Airways actually being able to raise new debt capital. Time is running out and so are Goyal’s options. The airline has ₹17 billion worth of debts to pay back before the end of the financial year. If Goyal is unable to close a deal, the airline might have to undergo insolvency proceedings, which seems a more unfavourable outcome than a loss of control via an outright sale. SEE ALSO: <a href="https://www.businessinsider.in/the-owner-of-jet-airways-is-reportedly-trying-to-secure-a-rescue-deal-with-partner-etihad-to-avoid-losing-control-of-his-struggling-airline/articleshow/66808564.cms">The owner of Jet Airways is reportedly trying to secure a rescue deal with partner Etihad to avoid losing control of his struggling airline</a> <a href="https://www.businessinsider.in/indias-largest-passenger-airline-just-posted-its-first-ever-quarterly-loss-since-going-public-and-its-results-reflect-the-larger-woes-of-the-countrys-aviation-sector/articleshow/66362156.cms">India’s largest passenger airline just posted its first ever quarterly loss since going public — and its results reflect the larger woes of the country’s aviation sector</a> <a href="https://www.businessinsider.in/jet-airways-has-a-plan-to-stave-off-a-potential-bankruptcy/articleshow/65992075.cms">Jet Airways has a plan to stave off a potential bankruptcy</a>

Jet Airways misses a loan repayment and gets downgraded again, further compromising owner Naresh Goyal’s plans to retain control of the airline

Noting that the economy has been on a downslide since September 2016, <keyword id="2017241" type="ORGANIZATION" weightage="20" keywordseo="sbi-research">SBI Research</keyword> today said the slowdown is real and not technical and called for more public spending to arrest the slide. "We certainly believe that we are in a slowdown mode since September 2016 and a slowdown that has been prolonged to Q1 of this fiscal year is technically not short-term in nature or even transient," SBI Research said in a report. The report said continuing slowdown has "raised the spectre of whether the slowdown is temporary or not" but stopped short of answering the question. The note comes days after <keyword id="14666" type="ORGANIZATION" weightage="20" keywordseo="bjp">BJP</keyword> president <keyword id="6355521" type="PERSON" weightage="20" keywordseo="amit-shah">Amit Shah</keyword> attributed the slowdown -- GDP growth slid for the sixth quarter in a row to hit a three-year low at 5.7 per cent in the June quarter-- to "technical reasons" without elaborating on the same. Shah had said growth had gone up to 7.1 per cent after falling to 4.7 per cent in FY14 when the <keyword id="6355364" type="ORGANIZATION" weightage="20" keywordseo="upa">UPA</keyword> was in power. The report advocated upping of spends by the government as a solution to the problem at hand. "Need of the hour is to spend to grow more," it said. "We believe the government should consciously expand spending and fiscal deficit, without disturbing the borrowing maths," the report said. It can be noted that in the past, such moves by the government were termed as "fiscal profligacy" by rating agencies, which had also threatened to downgrade the country's rating to junk if the Centre continued with such policies. The report admitted that after the 2008 global credit crisis, there was a surge in spending, but was unequivocal in not paying much heed to the rating agencies. "Let's not chase the rating upgrade mirage. India has had a solitary net rating upgrade in the last 25 years. The economy is in urgent need of a fiscal push now to shore up growth," the report said. The government can use a clause in the Fiscal Responsibility and Budget Management Act that provides for a 0.5 per cent slip in fiscal deficit targets, it said. Elaborating on how to keep the net borrowings in check, like the way the government has done in the current fiscal at Rs 3.4 trillion, it recommended the government to do more buybacks and switches in G-secs. It also called for exploring the short-term borrowing route more, saying " short term borrowings could be increased from the current levels, as movements in short-term rates depend crucially on liquidity."

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Moody's rating downgrade not surprising: SBI report

PTI

COVID-19: Fitch downgrades viability ratings of SBI, BoB, ICICI, Axis Bank

PTI

Icra downgrades rating on certain Yes Bank bonds

PTI

Moody's downgrades ratings of 8 firms including Infosys, TCS and ONGC

PTI

Plenty of liquidity available in the system: SBI chairman

PTI

Jet Airways misses a loan repayment and gets downgraded again, further compromising owner Naresh Goyal’s plans to retain control of the airline

Dilsher Dhillon

Indian economic slowdown is real, according to this research

BI India Bureau

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