Standard and Poor's today warned that it could downgrade rating of crisis ridden Syndicate Bank if itd asset quality deteriorates.
The global rating agency has issued a similar warning for Indian Overseas Band (IOB).
While it has maintained its negative outlook on these two banks, the agnecy raised the rating outlooks on 11 Indian banks and financial institutions to stable from negative.
These include, Bank of India, HDFC Bank, ICICI Bank, IDBI Bank, Indian Bank, IDFC, Kotak Mahindra Bank, Kotak Mahindra Prime, State Bank of India and Union Bank of India.
"The negative rating outlooks on Syndicate and IOB reflect a possible weakening in these banks' asset quality and capitalisation," the agnecy said.
S&P said it could downgrade Syndicate if the bank's asset quality deteriorates to below industry average levels or if the pre-diversification risk-adjusted capital (RAC) ratio falls below 5 per cent, which may happen if the bank grows aggressively and is unable to support growth with sufficient capital infusion.
"We could revise the outlook to stable if Syndicate can sustain its asset quality in line with industry levels," it however added.
The ratings on Syndicate continue to reflect the 'very high' likelihood of government support for the bank and the bank's average domestic business franchise and satisfactory funding and liquidity position.
Syndicate's low earnings diversity and moderate capitalisation temper the ratings.
In August, Syndicate Bank Chairman and Managing Director (CMD) S K Jain was arrested for allegedly receiving a bribe of Rs 50 lakh to enhance credit limits of Bhushan Steel and Prakash Industries. His service was terminated.
Referring to IOB, the agency said it could downgrade IOB if the bank is unable to raise sufficient capital to support growth, such that its RAC ratio dips below 5 per cent.
