Mumbai, May 14: Global rating agency Moody's today downgraded the credit ratings of the Life Insurance Corporation and the country's three largest private banks ' ICICI Bank, HDFC Bank and Axis Bank ' even as it red-flagged its concerns over their high exposure to sovereign debt and limited prospects for cross-border diversification.
The ratings agency downgraded the LIC to Baa3 from Baa2 with a stable outlook, in line with its Baa3 sovereign rating for India, which is the lowest investment grade rating. In December, Moody's had issued a stable outlook for India.
The downgrade of the state-owned life insurer came just two weeks after it put the country's largest portfolio investor under review for a downgrade citing the same concerns.
Moody's said LIC's credit worthiness was highly correlated with that of the Indian government's credit strength. Moreover, the LIC generated almost all its premia income in India.
"There is little, if any, reason to believe that LIC would be insulated from any government debt crisis, if it were to occur," Moody's said in a statement on Monday.
The three private banks saw their standalone credit ratings downgraded to D+ from C- to align their individual ratings with that of the sovereign rating.
The standalone bank financial strength rating (BFSR) of ICICI Bank, HDFC Bank and Axis Bank is revised down to D+ from C-, which now maps to a baseline credit assessment (BCA) of Baa3 from Baa2 on the long-term scale, Moody's Investors Service said in a statement issued in Singapore.
The agency also downgraded the hybrid ratings of Axis Bank and ICICI Bank to Ba3 from Ba2, but said all the revised ratings carried stable outlooks.
"The rating action follows in the context of the ongoing global review affecting all banks whose standalone ratings are higher than the rating of the government where they are domiciled, and they conclude the review that was initiated on April 30," Beatrice Wood, Moody's Investors Service vice-president, said.
Moody's also said the other ratings of these banks were unaffected and had stable outlooks.
Rap on Reliance
The rating agency also downgraded Reliance Industries Ltd as credit negative following the downward revision in the company's assessment of natural gas reserve.