Allahabad Bank<\/a>.<\/p>\n\u201cWe believe risks stemming from challenging operating conditions following COVID-19 have increased for Indian banks. We now expect the Indian economy to fall into recession in the current fiscal year,\u201d S&P said, adding that the asset quality of Indian finance companies is set to deteriorate, with credit costs rising and profitability declining over the next 12 months. \u201cGiven the large acceptance of moratorium by borrowers, funding and liquidity problems could worsen for these companies,\u201d it said.<\/p>\n
The ratings on Axis Bank\u2019s issuer credit rating was lowered to BB+\/Stable\/B from BBB-\/Negative\/A-3 to reflect S&P\u2019s expectation that heightened economic risks facing India\u2019s banking system will affect the bank\u2019s asset quality and financial performance. \u201cWhile Axis\u2019 asset quality is superior to the Indian banking sector average, its level of nonperforming assets (NPAs) will likely remain high compared to international peers\u2019. Nevertheless, we expect the bank to maintain its strong market position and adequate capitalization,\u201d S&P analysts said.<\/p>\n
The stable outlook reflects that the ratings on Axis Bank already factor in some deterioration in the bank\u2019s asset quality and performance over the next 12 months. The ratings could be lowered further if the bank\u2019s stressed assets rise significantly beyond the system average over the next few quarters.<\/p>\n
Bajaj Finance underwent a similar rating downgrade to reflect weaker operating conditions faced by Indian financial institutions. \u201cIn our base case, we believe the company\u2019s asset quality and credit costs will deteriorate over the next 12 months,\u201d S&P said. The agency has not factored in any extraordinary support from the Bajaj group into its rating on Bajaj Finance because the group entities are regulated or listed entities. They are, therefore, restricted in their ability to support Bajaj Finance in the case of an extraordinary event.<\/p>\n
Manappuram Finance was downgraded to B+\/Stable\/B from BB-\/Negative\/B to reflect the heightened risks associated with economic conditions in India and their high impact on the microfinance segment. \u201cThat said, the gold-backed loan business has held up relatively well under these conditions,\u201d S&P observed.<\/p>\n
Shriram Transport was downgraded to BB-\/Watch Neg\/B from BB\/Negative\/B and placed the ratings on credit watch because on expectations that challenging operating conditions in the Indian financial sector will lead to asset quality and liquidity stress for the company over the next 12 months. \u201cSTFC\u2019s dominant market position as India\u2019s largest commercial vehicle financier and its strong capitalization continue to support the ratings. STFC\u2019s plan to raise Indian rupee<\/a> (INR) 15 billion through a rights issue over the next 30-40 days will bolster its capital position,\u201d S&P said.<\/p>\nPFC was downgraded to BB+\/Stable \u2014 from BBB-\/Negative \u2014 to reflect the weakening general economic conditions in India. The power sector was severely hit by Covid-19 due to a decline in manufacturing demand and additional collection challenges for distribution companies that were already structurally weak. \u201cIn our view, the government\u2019s INR900 billion package to help distribution companies provides only a temporary liquidity solution and doesn\u2019t address fundamental issues with the creditworthiness of the sector,\u201d analysts at S&P wrote.<\/p>\n
![\"\"](\"https:\/\/images.financialexpress.com\/2020\/05\/1-97.jpg\")
![](\"https:\/\/images.financialexpress.com\/2020\/04\/telegram.png\")