The Centre, on Thursday, rapped Fitch for downgrading the credit rating outlook of 12 financial entities from ‘stable’ to ‘negative’ and asserted that the Indian banking sector “is safe, sound, strong and ready to face any global crisis.”
Slamming the rating agency for the outlook downgrade while speaking at an Assocham event here, Financial Services Secretary D. K. Mittal noted that the Central Government would be backing the banking sector in case of any crisis that might arise out of the ongoing global economic downturn.
“The Indian banking sector is safe, sound, strong and ready to face any global crisis and the rating agencies have no business to say that Indian financial institutions are in a bad shape as there is no crisis-like situation, while these agencies are creating a further crisis by shaking the confidence of economies doing good globally like that of India…The so-called global rating agencies are based out of the U.S. and the Europe and these agencies are de-rating the financial products based in the U.S. which does not stand equal for India,” Mr. Mittal said.
The government’s objection to the downgrade came a day after Fitch’s rating action on the 12 financial entities, which was more of a follow-up action to the sovereign rating outlook revision. Of the 12 entities affected by the rating downgrade are eight public and private sector banks — State Bank of India, Bank of Baroda and its overseas subsidiary, Canara Bank, Punjab National Bank, IDBI Bank, ICICI Bank and Axis Bank. The remaining four are financial institutions (FIs), namely, Export-Import Bank of India, Hudco, IDFC and Indian Railway Finance Corporation.
Pointing to concerns pertaining to the lack of capital with public sector banks (PSBs), Mr. Mittal noted that the issue of crisis of capital in Indian banks was highly over-rated as banks in India park about 28.75 per cent of their deposits with the government and the Reserve Bank of India — 24 per cent in the form of SLR (statutory liquidity ratio) and 4.75 per cent as CRR (cash reserve ratio). This, he said, was “a practice which is followed nowhere else in the world but in India and, as such, there can be no crisis of capital.”