New Delhi: Moody’s Investors Service (Agency) have, vide their Rating Action dated June 2, 2020 communicated that Moody’s have downgraded IndusInd’s long-term local and foreign currency deposit ratings to Ba1 from Baa3 and its BCA to ba2 from ba1. The rating outlook is negative. Moody’s have clarified that the key drivers for rating downgrade is caused due to economic disruptions caused by the coronavirus and the downgrade of the sovereign rating. The rating action of Moody’s follows Moody’s recent downgrade of the Indian government’s issuer rating to Baa3 from Baa2 with a negative outlook.
On March 9, 2019, Moody’s assigned Issuer Rating of ‘Baa3’ with a ‘Stable Outlook’ for the Euro Medium Term Notes (eMTNs) and the Bank raised USD 400 million in April 2019 which works out to 1% of the Balance Sheet at current level. These bonds are listed on India International Exchange and on Singapore Stock Exchange.
The downgrade of IndusInd’s BCA to ba2 from ba1 incorporates the risks to bank’s asset quality and profitability amid the deteriorating macro environment and financial market volatility. IndusInd’s funding is weak compared with other rated Indian banks, as reflected by its high deposit concentration and low share of retail deposits. This weaker funding makes the bank more susceptible to dislocations in financial markets, including in terms of wholesale funding sources.
