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S&P revises outlook on 12 Indian banks to negative due to cut in Indian sovereign credit outlook

February 25, 2009: Standard & Poor's Ratings Services said that it had revised the outlook on the counterparty credit ratings for the following Indian banks to negative from stable:

-- Axis Bank (BBB-/A-3)
-- Bank of Baroda (BBB-/A-3)
-- Bank of India (BBB-/A-3)
-- Canara Bank (BBB-/A-3)
-- HDFC Bank Ltd. (BBB-/A-3)
-- ICICI Bank Ltd. (BBB-/A-3)
-- IDBI Bank Ltd. (BBB-/A-3)
-- Indian Overseas Bank (BBB-/A-3)
-- Indian Bank (BBB-/A-3)
-- State Bank of India (BBB-/A-3)
-- Syndicate Bank (BBB-/A-3)
-- Union Bank of India (BBB-/A-3)

The outlook revisions follow a similar revision to the sovereign credit rating on India (BBB- /Negative/A-3)...Read more

Standard & Poor's does not rate Indian banks above the sovereign rating on India because of the direct and indirect influence that the sovereign in distress would have on a bank's operations, including the bank's ability to service foreign currency obligations. This belief stems from the following factors: (1) banks in India are subject to policy and regulation by the government; (2) they invest a significant portion of funds in government securities; (3) a high proportion of their revenue streams emanate from India; and (4) a large number of Indian banks are majority owned by the government.

The negative outlook on the 12 banks reflects that on the sovereign ratings, after factoring in implicit support from the Indian government. However, sharp deterioration in a bank's stand-alone financial performance may lead to a rating downgrade independent of the sovereign ratings' direction.

(This is press release of Standard & Poor's)

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