Government seeks SBI's explanation on Moody's downgrade
05 October 2011
The government has sought an explanation from the State Bank of India (SBI) about the downgrade of the bank by international ratings agency, Moody's, according to Pratip Chaudhuri, the SBI chairman.
On Tuesday, Moody's downgraded the standalone rating of India's largest commercial bank by one notch to 'D+' from 'C-' because of its low tier-I capital ratio and deteriorating asset quality. The 'D+' rating suggests ''modest intrinsic financial strength, potentially requiring some outside support at times.'' (See: Moody's lowers SBI rating to `D+' as capital base dips, NPAs rise)
SBI shares plunged to two-year lows on the Bombay stock exchange on Wednesday, following the downgrade.
''It is a downgrade of a small segment of the bank's debt,'' said Chaudhuri, pointing out that the bank's overall rating was still a notch above sovereign rating. He was confident the rating would be restored after the rights issue, which had been postponed by the bank.
The SBI chairman was hopeful that it would get additional capital of between Rs3,000 and Rs5,000 crore from the government later this year, or by early 2012, raising its tier-I capital adequacy to above nine per cent.
The government has a 59.4-per cent stake in SBI, the highest among nationalised banks. The government has a 57 to 58 per cent stake in most other leading public sector banks including Punjab National Bank, Bank of Baroda, Union Bank of India and Corporation Bank.