FITCH RATINGS AFFIRMS STABLE OUTLOOK FOR PSU BANKS, CITES INDIA'S GROWTH, RESILIENCE

Funding remains a strength for PNB as customer deposits constituted about 91 per cent of total funding in 9MFY24 by our estimates, driven by high depositor confidence due to the bank’s close state linkages.

- NIVEDITA MUKHERJEE

Fitch Ratings has affirmed a stable outlook for public sector banks in India it rates, with the rating action underlined by India's robust mediumterm growth potential supported by expectation of a GDP growth of 7 per cent in 2024 and 6.5 per cent in 2025 and investment prospects.

"The economy remains resilient as healthy business sentiment, buoyant financial markets and the government's capital spending buffered global economic headwinds and inflation.

These factors are conducive for banks to sustain profitable business, provided risks are well-managed," the Fitch report points out.

The ratings of Canara Bank, State Bank of India, Union Bank of India and Punjab National Bank among others are driven by criteria ranging from government support, strong operating environment, dominant presence, double digit loan growth, strong profitability and dominance of deposits and modest capital buffers.

The score of 'bb+' given on operating environment (OE) of the State Bank of India is precisely because of this view of India's robust medium-term growth potential.

According to Fitch, the State Bank of India has the highest probability of extraordinary state support among Indian banks, if required. This takes into consideration SBI's market position as the largest Indian bank, the state's 56.9 per cent controlling ownership and its broader policy role than peers.

The rating agency has also given a stable outlook on the international depository receipt (IDR) which is a negotiable certificate issued by a bank, representing ownership of a number of shares of stock in a foreign company that the bank holds in trust.