[sbinews] Moody's upgrades SBI's deposit rating

  • From: "Rajendra S Pai" <rspai@xxxxxxxxxxxxxx>
  • To: sbinews@xxxxxxxxxxxxx
  • Date: 16 Aug 2004 03:16:38 -0000

Moody's upgrades SBI's deposit rating 
Saturday, 14 August , 2004, 12:17 
Moody's Investors Service has upgraded the long-term local currency deposit 
rating of State Bank of India to A2 from A3. 

The upgrade was triggered by an improved operating environment in India thanks 
to robust economic growth and abundant liquidity. 

The rating also reflects Moody's assessment of the government's capacity to 
avoid a sustained interruption in the banking payment system or a freeze on 
local currency deposits. The rating outlook is stable, Moody's Investors 
service said in a statement. 

Moody's revised local currency deposit rating also incorporates SBI's inherent 
financial strength, together with its leading franchise and competent 
management, albeit set against some asset quality concerns. 

State Bank of India's D+ (repeat D plus) financial strength rating is currently 
the highest among Indian rated banks (the private commercial bank ICICI Bank is 
also rated D+), and reflects its dominant market position as well as good 
liquidity levels, solid and consistent profitability and adequate 

Moody's regards SBI as "too big to fail", the statement said. 

"In our opinion, it is inconceivable that the Indian central government and 
central bank would allow SBI, the country's leading commercial bank, with a 29 
per cent market share in total assets and holding 24 per cent of total banking 
system deposits on a consolidated basis, to default on its local currency 
obligations", Moody's said. 

Moody's believes that retail depositors would be considered senior to any other 
local currency obligation, considering the systemic risk to the Indian banking 
system and economy. 

Moody's ratings also address the probability that SBI's ability to repay its 
local currency depositors would be caught up in a possible default/rescheduling 
of the government's debt. 

In such a scenario, Moody's believes that the bank would be likely to be able 
to meet its obligations from its own resources and, further, that if the bank 
were to experience any difficulty, the Reserve Bank of India would make 
sufficient funds available. 

The rating, however, is somewhat constrained by the probability that such 
support may not come in a timely fashion due to the absence of an explicit 
support mechanism in India, Moody's concluded. 

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