Indian Banks Rush for Global Ratings Amid Rising Credit Demand

Indian banks are increasingly seeking international credit ratings as they prepare to tap overseas funding markets and attract foreign-currency deposits, particularly through FCNR (B)-linked fund-raising programmes, which are gaining momentum.

Banks Rush for Global Ratings Amid Rising Credit Demand

The latest entrant is Federal Bank, which on Wednesday received its first-ever international issuer credit ratings from S&P Global Ratings — BBB-/Stable for the long term and A-3 for the short term. The investment-grade rating is expected to strengthen the bank’s access to global debt markets and diversify its foreign-currency funding sources.

Key Factors Behind the Ratings

The ratings were assigned based on several key factors, including the bank’s improving asset quality and strategic support from its shareholder SMBC. This support has been a crucial factor in underpinning the rating, as it provides a stable source of funding and expertise.

Market Impact and Details

• The development comes amid a broader trend among Indian lenders looking to shore up foreign-currency liabilities as credit demand rises.
• YES Bank also secured a fresh international rating from S&P Global Ratings, which assigned the lender a BB+/Stable long-term issuer credit rating and a B short-term rating.
• Bank of Baroda (BoB) is planning to raise up to $1 billion through the issuance of senior unsecured notes, with CareEdge Global Ratings assigning a BBB+/Stable long-term foreign-currency rating to the proposed notes.
• Among other Indian lenders, State Bank of India, HDFC Bank, ICICI Bank, Axix Bank, Kotak Mahindra Bank, and Bank of Baroda carry investment-grade international ratings.

Key Takeaways

• Global ratings are increasingly becoming a prerequisite for accessing overseas investors, issuing foreign-currency bonds, and mobilizing FCNR deposits from non-resident Indians.
• An international rating provides comfort to global investors and can help banks lower overseas borrowing costs.
• Indian banks are positioning themselves to tap overseas markets for capital, with several lenders already securing international ratings.

FAQs

What is the significance of FCNR (B) fund-raising programmes?

FCNR (B) fund-raising programmes allow Indian banks to tap overseas funding markets and attract foreign-currency deposits, which can help diversify their funding sources.

What are the benefits of international credit ratings for Indian banks?

International credit ratings provide comfort to global investors and can help banks lower overseas borrowing costs. They also strengthen the bank’s access to global debt markets.

Which Indian banks have already secured international ratings?

Several Indian banks, including State Bank of India, HDFC Bank, ICICI Bank, Axix Bank, Kotak Mahindra Bank, and Bank of Baroda, carry investment-grade international ratings.

Conclusion

The trend of Indian banks seeking international credit ratings is expected to continue, as they position themselves to tap overseas markets for capital. With several lenders already securing international ratings, the market is likely to see increased activity in the coming months. As the demand for foreign-currency deposits continues to rise, Indian banks will need to adapt to the changing market landscape and secure international ratings to remain competitive.