Govt slams Fitch credit rating downgrade of banks

Govt slams Fitch credit rating downgrade of banks

The government today said there was no reason for such action by the rating agency.

Hitting out at global rating agencies for lowering credit outlook of Indian banks,the government today said these entities are fully capitalised and there is no cause of “worry.”

“Crisis of capital in the Indian banking system is highly over-rated. The government of India is fully behind public sector banks,whatever rating agencies may say. They can always have a right to say,” Department of Financial Services Secretary D K Mittal said at Assocham event here.

“Public sector banks are fully capitalised,they shall sufficiently capitalised during this year also. So there is no cause of worry,” he said.

The government has proposed to infuse Rs 15,500 crore in the public sector banks during the current fiscal to enhance their financial strength.


“We don’t find any reason whatsoever that why Indian banks should be downgraded…The banks which have been downgraded,there is no reason for downgrade by rating agencies,” Mittal said.

Yesterday,Fitch revised downward credit rating outlook of 12 financial agencies,including State Bank of India (SBI),ICICI bank,Punjab National Bank (PNB).

Fitch’s rating action comes within days of it lowering the credit outlook of the India from stable to negative.

The list of downgraded entities include six PSUs and two private banks. These include Bank of Baroda (BoB) and its overseas subsidiary Bank of Baroda (New Zealand),Canara Bank IDBI Bank and Axis Bank.

Others to be affected by the rating action include Export-Import Bank of India,Hudco,IDFC and Indian Railway Finance Corporation.

Unimpressed with the rating observation,Mittal said “these are rating agencies which are rating us down. What has happened 6 months time,it is is unbelievable that you rate us down for what.”

At this point of time,he said,”it is absolutely absurd for anybody to de-rate Indian institutions” which are in better shape compared to their global counterparts.

“So,I think in this crisis,it is creating further crisis by creating non-confidence in the countries which are doing well (amid current global uncertainty),” he said.

Indian economy posted a growth of 6.5 per cent during 2011-12 lowest ever in 9 years.

Even in this crisis,Mittal said,”the non-performing assets are not at the significant level any significant levels looking at what is happening globally.”

Assuring that there is no crisis in Indian banking system,the sector has remained sound in India. It has passed all the crisis in the earlier years.

Talking about the on-going crisis in the world economy Mittal said,”we are living in a very highly inter-connected world where individual economies cannot remain oblivious of happenings in other parts of the globe.”

Dismissing possibilities of any huge impact of the same on India he said,there could be a cause of concern but there is no alarming situation as such,Indian banks are insulated from all the rumours of crisis doing rounds.

On the government’s preparedness and policy measures being taken to deal with any crisis,Mittal said,”we have a crisis management group which meets regularly and have representatives of all regulators and key departments of the government.”

In addition,Mittal said,”We have set up a group with regulators and government together headed by the RBI Governor who meet together and look at all issues concerning the inter-regulatory co-ordination and more importantly on how to handle the on-going crisis and what kind of preparation we have made.”

In this crisis,he said,”We must improve our efficiency,we must remove the wastages,we must make services services better and cheaper. That’s what are promoting through public and private sector banks.”


Mittal also said that the small and medium enterprises (SMEs) must be supported and there is a need to provide them with credit as they form a core foundation of a sound Indian economy and more so as demand of credit from large investors are drying up,SMEs have a vital role to play to bail out the economy in times of crisis.