Bankers give a thumbs up to Moody’s sovereign rating update


Bankers have given a thumbs up to the rating upgrade by global rating agency Moody’s to India’s sovereign bonds boosting hopes for further growth in the country.

Rating agency Moody’s lifted India’s government bond rating to Baa2 from Baa3. The agency also changed its outlook to stable from positive.

“This was most expected. Questions were always asked why they were not upgrading it. It gives thumbs up to the economic prudence and reforms,” SBI Chairman Rajnish Kumar said at the 34th Asian Bankers Association Conference.

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On the outlook for banking sector, Rajnish said: “Once this challenge of asset quality and recapitalisation plan, announced by the government, are behind us, we are set for growth.”

Banks are well poised to contribute to the growth of the economy and are investing both time and money to upkeep the economy.

The upgrade is a big positive, said Uday Kotak, Managing Director of Kotak Mahindra Bank adding, “the world is noticing India’s move to stability. But more reforms need to be done.”

“In my view, the rating upgrade for sovereign should be similar for the bank,” he added.

On benefits of the upgrade, Kumar said, “The cost of foreign borrowings automatically comes down. The foreign investors, they are able to raise their (investment) limits because it all depends on the country rating, and sometimes, even if they desire to invest, they get constrained by the country rating.”

It is re-affirmation of how the world views India. The economic reforms programme which the government has initiated are starting to show results after a period of pain. The government’s fiscal prudence itself gets a thumbs-up, apart from the far reaching reforms which we have seen in the banking sector, Kumar said.

“If you recall…I had said that views on Indian economy and reforms are more positive outside India than within India,” he added.

Alluding to the hiccups faced during implementation of GST and demonetisation, the SBI chief said, “Some of the reforms are mind boggling and have brought some difficulty in the transition period but ultimately, no gain without pain.”