NEW DELHI, Mar 1: IDBI Bank’s rating is not immediately affected by the government’s announcement to lower stake in the lender to below 50 per cent, Standard & Poor’s today said.
The US-based agency said the rating of the PSU lender could come under pressure if the government decides to lower its stake in IDBI either based on the recommendation of the Banks Board Bureau or of its own accord.
“It remains to be seen if the government will choose to privatise IDBI. For now, we see a very high likelihood that the government will provide timely and sufficient extraordinary support to IDBI, given the bank’s majority government ownership,” S&P Ratings Services said in a report.
Ratings on IDBI Bank are “not immediately affected” by the government’s announcement that it could consider reducing its stake in the bank, S&P said.
The ratings will be reviewed following greater clarity on what the government ultimately considers, it added.
“IDBI’s very strong link with and very important role for the Indian government underpin our view of the likelihood of extraordinary government support in the event of the bank’s financial distress,” it added.
The Indian government owns 80.16 per cent of IDBI as of December 31, 2015.
The US-based agency said it could downgrade IDBI if it feels the likelihood of extraordinary government support has weakened.
“We may even revise the outlook to negative if we see increased risk of privatisation,” it added.
In his Budget, Finance Minister Arun Jaitley has said that the process of transformation of IDBI Bank has already started and could consider the option of reducing its stake in the bank to less than 50 per cent. (PTI)
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