The Credit Rating and Information Services of India Ltd (Crisil) has upgraded the ratings awarded to three housing finance subsidiaries of nationalised banks.
The fixed deposit issue of Corpbank Homes Ltd has been upgraded from FA to FA+, while that PNB Housing Finance has been upgraded to FA+ from FA-.
The fixed deposit rating of Vibank Housing Finance Ltd has been upgraded to FA to FA-. Corpbank is the housing finance subsidiary of Corporation bank and PNB Housing and Vibank are the housing finance subsidiaries of Punjab national bank and Vijaya Bank, respectively.
Corpbank and PNB Housing are wholly owned subsidiaries while Vibank is promoted by Vijaya bank and the National Housing bank (NHB). Giving the rationale for the ratings, Crisil says that notching up of standalone ratings of subsidiary companies on the basis of parent support has been central to the analytical criteria as support from a strong parent can offset the probability of default.
The agency believes that the incentive for a parent to support its subsidiaries in situations of financial stress is driven by the economic rationale for the parent to support the subsidiary and factors which constitute a moral obligation on the parent to support the subsidiary.
Parameters which constitute the economic rationale for the parent to support the subsidiary include the strategic importance of the subsidiary to the parent, the extent of integration of operations and the commonality of businesses between the parent and subsidiary, current and prospective extent of parent holding in subsidiary and the economic incentive to the parent to continue sustained support to the subsidiary.
The analytical framework does not notch up stand-alone ratings of subsidiary companies for parent support in case the track record of the parent in supporting its subsidiaries in times of financial stress is not satisfactory. Due weightage is given to the demonstrated track record of the parent in supporting its subsidiaries both financially and managerially. The extent of notching up is also influenced by the parent's own rat
