Context:
Moody’s is reviewing the Baseline Credit Assessment (BCA) of IndusInd Bank for possible downgrade.
The review is in line with the recent revelation of an accounting discrepancy amounting to â‚ą2,100 crore, which could impact the net worth of the bank to the extent of 2.35%.
What is Baseline Credit Assessment (BCA)?
Baseline credit assessments are based on the entity’s standalone financial health, without considering any support it might get from related companies.
Current Ratings
- Moody’s affirms the following ratings with a stable outlook
- Long term and short term foreign currency bank deposits: Ba1/NP
- Local currency bank deposits and issuer ratings: Ba1/NP
- Counterparty risk ratings: Ba1/NP
Bearer Meaning of BCA
- The BCA represents the financial health of the bank when it stands on its own, and does not take into consideration external support by related or affiliated companies.
Fundraising Move
- Even amidst the accounting controversy, IndusInd Bank raised Rs 110 billion ($1.27 billion) through short term notes (Certificates of Deposit).
- It also marks the first move after the fine since the financing was done at marginally higher rates.
- The maturity profile of the CDs issued ranges from three months to one year.
IndusInd bank is undergoing the microscope of judgments along with the potential downgrade review from Moody. However, it believes it can raise funds shortly after the accounting discrepancy disclosure, which demonstrates resilience and continued market confidence but with a higher cost of borrowing.
Source: BS
