Fitch director for financial institutions in India Saswata Guha said it is a step in the right direction and a way to prepare them for the future, but this is not a remedy to the current problem that banks are dealing with such as low capital and high non-performing loans.
The audit has also flagged attempts by the erstwhile top management of IL&FS to influence the ratings including by extending favours and gifts, and also by pressure tactics like threats to move to another agency.
The capacity for payment of financial commitments is considered adequate, but adverse business or economic conditions are more likely to impair this capacity.
India's GDP growth declined for the fourth consecutive quarter in January-March, with the economy expanding by 5.8 per cent, down from a cyclical high of 8.1 per cent in the March quarter of 2018.
'Fitch Ratings has downgraded ICICI Bank Limited's Long-Term Issuer Default Rating (IDR) to 'BB+' from 'BBB-' and its Viability Rating to 'bb+' from 'bbb-'. The Outlook on the IDR is Stable,' it said.
The ongoing trade war could lead to China dumping goods at predatory prices in emerging markets, including India, and potentially disrupting the domestic demand-supply dynamics in the country, the agencies said.
The Monetary Policy Committee (MPC), headed by RBI Govenor Shaktikanta Das, cut rates in February and April citing prospects of benign inflation. In the four months of 2019, the RBI has cut policy interest rates twice by 0.25 percent each to one-year low of 6 percent.
"Neither the Bharatiya Janata Party (BJP) nor Indian National Congress (INC) are pledging significant policy reform in the telecom sector, which will continue to suffer from depressed earnings and elevated debt levels in the near term.
Fitch expects growth of 6.8 per cent in the current fiscal and 7.1 per cent in the next, supported by accommodative monetary policy, easing of bank regulations, and government spending.
IOC and Hindustan Petroleum Corp Ltd (HPCL) won city gas distribution rights in nine geographical areas each last month, and BPCL got rights to two areas.
Fitch estimates that banks will need an additional USD 23 billion (around Rs 1.6 lakh crore) in 2019, after these latest injections, to sufficiently meet minimum capital standards.
But the system-wide impact of this will be limited, as there were masala bonds and foreign-currency debt issuances recently with a minimum average maturity of 10 years, global rating agency Fitch said on Friday.
The board of IOC last week approved buyback of up to 29.76 crore equity shares, or 3.06 per cent of share capital, at Rs 149 per share aggregating to Rs 4,435 crore. It also approved payment of Rs 6,556 crore as interim dividend to shareholders.
Patel resigned abruptly from the post of the Governor on December 10, nine months before his term was scheduled to come to an end in September 2019.
This rate is higher than the rating agency's previous expectation of 2.2x (times), shrinking the already-low headroom for OIL's 'BBB-' standalone credit profile as Fitch's current negative rating norms for net leverage is 2.5 times.
In an interview to PTI, Fitch Ratings Director (Financial Institutions) Saswata Guha said, given the past record, it is unlikely that banks would exercise prudence while restructuring loans of micro, small and medium enterprises (MSME).
It put fuel consumption growth at 6 percent in 2019, up from 5.5 percent this year.
While cutting excise duty by Rs 1.50 per litre, the government had on Thursday asked Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) to absorb Re 1 per litre increase in fuel rates.
The government had last week announced its plan to merge BoB with Vijaya Bank and Dena Bank to create the third largest bank in the country. The boards of each bank will meet to give a go-ahead to the proposed merger.
According to the report, one of the key factors that will help the country tide over the rupee crisis is the relatively low foreign currency debt.
“Relatively strong external finances, especially the low level of external debt” also support India’s credit profile.
International rating agency Fitch sees an operating margin of per tonne for its domestic operations (ex-acquisitions) of around Rs 13,000 in FY19, similar to the FY18 level, dropping slightly to around Rs 12,500 annually thereafter.
Tata Steel Ltd (TSL), which won the bid for Bhushan Steel Ltd (BSL) under the insolvency process, completed the acquisition of controlling stake of 72.65 percent in the debt-laden firm last week.
Fitch, which last month kept India's sovereign rating unchanged for the 12th year in a row, said the country's ratings "balance a strong medium-term growth outlook and favourable external balances against a weak fiscal position and difficult business environment".
The ratings, which includes a one-notch uplift from its standalone rating of 'BB' on its linkage with Tata Sons Limited (TSOL), reflects its leading position in the domestic commercial-vehicle market and the passenger-vehicle business, which is recovering after the success of new product launches in recent years, Fitch said a statement.