American credit rating agency Fitch on Monday revised the outlook of nine Indian banks to "negative" from "stable" owing to the COVID-19 pandemic impact on Indian economy.
It affirmed ratings on Issuer Default Ratings (IDRs), Support Ratings (SR) and Support Rating Floors (SRF).
The ratings have been reviewed on the Long-Term IDRs following India's long-term outlook to negative from stable on June 18.
IDRs take into account an entity's relative vulnerability to default on financial obligations.
The nine Indian banks whose ratings have been revised covers- Axis Bank, Bank of India (BOI), Bank of Baroda (BOB), BOB's subsidiary in New Zealand, Canara Bank, Export-Import Bank of India (EXIM), ICICI Bank, Punjab National Bank (PNB), State Bank of India (SBI).
"The negative outlook on India's sovereign rating reflects an increasing strain on the state's ability to provide extraordinary support, due to the sovereign's limited fiscal space and the significant deterioration in fiscal metrics due to the challenges from the COVID-19 pandemic," Fitch Ratings said in a press statement.
The IDRs for Indian banks were assessed at BB+ based on an evaluation of high to moderate likelihood of extraordinary state support for these banks.
"The IDRs for Indian banks are support-driven and anchored to their respective SRFs. They are based on an assessment of a high to moderate probability of extraordinary state support for these banks. This takes into account our assessment of the sovereign's ability and propensity to provide extraordinary support," the ratings agency said.
Fitch noted that the rating it gave SBI reflects the likely extraordinary state support the bank will get, if required, because of its very high systemic importance.
SBI is India's largest bank with around 25% market share in deposits and system assets. It is 57.9% state-owned and has a more comprehensive policy role than its counterparts.
Fitch also confirmed IDBI Bank's IDR at BB+ while maintaining the outlook at negative.