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ICRA may revise ratings of government-owned banks

Investment Information and Credit Rating Agency is planning to revise the ratings of public sector banks as their credit profile has deteriorated significantly following a sharp rise in bad loans during the Oct-Dec quarter.
This deterioration is mainly due to greater provisioning as required by RBI. Many public sector banks have suffered losses during the third quarter due to this higher provisioning. Since most banks provided only 50 per cent that was mandated by RBI in Q3, similar provisioning will be required in Q4 too.
Why revision required?
1. Due to mounting losses, the capital positions of these banks have deteriorated and so according to ICRA it will be difficult for these lenders to raise funds from non-government sources.
2. Credit profile of public sector banks has worsened because of
 Higher than anticipated stress,
 Slower than expected pace of recovery and
 Weak outlook for several credit intensive sectors
3. Adverse capital markets conditions have reduced the prospects of mobilising capital from non-government sources
4. No material success in mobilizing capital through Additional Tier I (AT1) instruments

Investment Information and Credit Rating Agency (ICRA)
 It is an Indian independent and professional investment information and credit rating agency.
 It was established in 1991, and was originally named Investment Information and Credit Rating Agency of India Limited (IICRA India).
 It is headquartered at Gurgaon, Haryana.
 It is one of the largest Indian rating companies in term of customer base.
 It was a joint-venture between Moody’s and various Indian commercial banks and financial services companies.
 The company changed its name to ICRA Limited, and went public on 13 April 2007

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