Crisil upgrades bonds of public sector banks

Rating agency Crisil, on Monday, upgraded the bond ratings of four public sector banks""Bank of Baroda, Canara Bank, Indian Overseas Bank and Syndicate Bank.

This follows a reassessment of the Government of India's support to public sector banks and the expected robust economic growth, a Crisil release said.

Referring to the recent developments in the banking sector, Crisil said there is greater evidence pointing to the sufficiency and timeliness of support from the Government of India.

Bank of Baroda's Rs 600 crore bond programme has been upgraded to 'AAA/ stable' from 'AA+'. Similarly Canara Bank's Rs 450 crore bond programme has been upgraded to 'AAA/ stable' from 'AA+'.

Three bond programmes of Indian Overseas Bank (of Rs 175 crore, of Rs 150 crore and Rs 125 crore) have been upgraded to 'AA+/ stable' from 'AA/ stable'.

The certificates of deposit programme have been reaffirmed with a rating of 'P1+'. Syndicate Bank's Rs 125 crore bond programme also was upgraded to 'AA+/ stable' from 'AA/ stable'.

According to Crisil, even distressed private sector banks have been, at times, been rescued by Government of India to protect depositors and creditors. The recent GTB episode in which a sinking private sector bank was merged into a public sector one is a testimony to that.

"Government of India's response would be stronger in case of public sector banks, which typically have significant retail depositor bases and large work force...Government of India's support has been adequately demonstrated by repeated instances of large recapitalisation of public sector banks. The fact that the government has ensured that no public sector bank has even approached a liquidity crisis, continues to reinforce the public's perception of sovereign backing," said the Crisil statement.