Crisil upgrades ratings of eight public sector banks

The rating agency has assigned highest long-term ratings to Bank of India and Union Bank of India, upgraded ratings of Allahabad Bank, Bank of Maharashtra and UCO Bank, revised upwards the outlook of Canara Bank, Corporation Bank and IDBI Bank as stable.
Stable outlook means that ratings are not to be downgraded in the near future.

The rating action by Crisil follows the announcement by Finance Minister Pranab Mukherjee that the government would continue with its reform programme but will not dilute its stake below 51 per cent in the public sector banks (PSB).

“These measures represent a stronger and more specific articulation of the government intent than in the past. This articulation is a key factor in Crisil's reassessment of the expected support,” Raman Uberoi, senior director, Crisil Rating, said.

The agency said the government had reiterated taking measures to maintain capitalisation in PSBs at around 12 per cent so as to help the banks grow and stay competitive.

In 2008-09, the government had infused Rs 1,650 crore of capital into three PSBs and had committed to infusing Rs 2,150 crore more by the end of September.
"Since Indian banks are already well-capitalised, we believe that this enhanced commitment from the government towards ownership and capital support signals that it will do everything possible to further strengthen the PSBs,” Pawan Agrawal, director Crisil said.

In fact, some of the banks (PSB) have declined budgetary support and told the government that they can mobilise their own funding requirements.
"This once again shows that there is no need of any dilution of the government's stake in the banks below 51 per cent. Rather it will be well above it," Mukherjee had said during the debate on Budget in Parliament.