Moody’s Investor Services revised its outlook for three public sector banks (PSBs) viz. Bank of India(BOI), Oriental Bank of Commerce (OBC) and Union Bank of India.
Capital infusion
The rating agency said announcement of the government’s capital infusion plan is the key driver of the change in outlook.
The government had announced ₹2.11 lakh crore capital infusion plan for public sector banks in two fiscals — 2017-18 and 2018-19.
“The quantum of the plan is large enough to help improve the capitalisation levels of the banks,” it said.
Moody’s said the revision in the outlook for BOI’s, Union Bank and OBC from negative to stable reflects its view that the government’s capital infusion plan would alleviate some of the downside risks to their baseline credit assessments (BCA) and ratings. Earlier, BCAs of these banks were under pressure due to deterioration in their asset quality as well as Moody’s expectation of pressure on their profitability as they continued to build loan loss buffers.