Moody's Maintains Stable Outlooks On Three Indian Public Sector Banks

Moody's Ratings (Moody's) on Friday affirmed the Baa3 ratings on three Indian public sector banks -- Bank of Baroda (BOB), Canara Bank, and Punjab National Bank (PNB). The rating agency maintained stable outlooks on the long-term ratings of all three banks.

Explaining the rationale in a press release, the rating agency said today's rating action reflected the three banks' improved credit metrics.

Moody's also believes that India's strong operating environment will continue to support their credit fundamentals over the next 12-18 months.

The banks' respective nonperforming loan (NPL) ratios have also declined. Moody's said their improving profitability will support capitalisation despite strong loan growth and higher risk weight requirements for unsecured lending.

"The banks' strong liquidity buffers and low reliance on market funds support their funding," Moody's said.

BOB's, Canara's and PNB's NPL ratios respectively declined to 2.9 per cent, 4.2 per cent and 5.7 per cent as of 31 March 2024 from 3.8 per cent, 5.4 per cent and 8.7 per cent a year earlier, supported by lower bad loans (or slippage) as well as stronger recoveries and higher write-offs.

"Although their rapid growth of unsecured retail loans will pose risks to their asset quality, such loans represent a small share of their total loans. The banks have also built adequate loan loss reserves to buffer against future credit losses," the rating agency said.

However, Moody's sees an increase in funding costs, leading to some moderation in their profitability over the next 12-18 months.

Bank of Baroda is headquartered in Mumbai and reported consolidated assets of Rs 16.5 trillion (USD 197.8 billion) as of March 31, 2024.

Punjab National Bank is headquartered in New Delhi and reported consolidated assets of Rs 16.0 trillion (USD 191.8 billion) as of March 31, 2024.

Canara Bank is headquartered in Bangalore and reported consolidated assets of Rs 15.4 trillion (USD 184.6 billion) as of March 31, 2024. (ANI)