Rating outlook upgrade to soften lenders' cost of funds: Indian Banks Assoc

Mumbai: Welcoming the recent move by global rating agency Standard & Poor’s to upgrade the country’s sovereign rating, the Indian Banks Association (IBA) has said it will help lenders’ cost of funds by softening rates at which they borrow internationally.

“The S&P positive outlook will certainly help in ensuring that the cost of funds are comparatively softened and the investor’s world will look at opportunities positively,” the lobby group’s chief executive M V Tanksale said.

The upgrade in the outlook comes at a time when banks in the country are looking at raising money from abroad, especially for the new instrument of tier-I bonds under the Basel-III capital framework, Mr Tanksale said.

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The banks are also nudging their corporate clients to raise money from abroad, he said, adding that the upgrade in outlook would help reduce cost of funds for both the groups.

In a boost to Prime Minister Narendra Modi before his arrival in the US, S&P raised India’s credit rating outlook to ‘stable’ on the back of strong political mandate helping fiscal and economic reforms.

“Our outlook revision indicates that we believe the current government’s strong mandate will enable it to implement many of its administrative, fiscal, and economic reforms,” S&P said.

The international rating agency followed it up with upgrading outlooks for state-run financiers like Exim Bank, IIFCL, IRFC and PFC to ‘stable’, which is linked to the sovereign rating.

PTI