Moody's Investor Service on Wednesday downgraded ratings on Bank of India's debt programmes by one notch, citing an accelerated pace of asset quality deterioration, stressed core capital levels and increased pressure on profitability. Slowing economic growth in India, high interest rates and inflation will continue to adversely impact repayment capacity of the bank's corporate borrowers, Moody's said on Wednesday.
"Moody's expects that it will be difficult for BOI to significantly improve its relatively weak asset quality over the next 12-18 months," it said. Moody's revised its "Bank Financial Strength Rating" to D from D+ on a scale of A to E. India's sovereign rating is Baa3.
However, it affirmed the outlook on the debt and deposit ratings at stable. Shares of the bank extended their fall to more than 3 percent after the downgrade but recouped some losses after a senior executive said the lender does not expect a deterioration in asset quality. Bank of India expects bad loans in the financial year ending in March 2012 to be lower than the previous year, Executive Director N. Seshadri told CNBC TV18.
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