The investment-grade rating is expected to strengthen the bank’s access to global debt markets and diversify its foreign-currency funding sources | Photo Credit: EMOJOEZ

Indian banks are increasingly seeking international credit ratings as they prepare to tap overseas funding markets and attract foreign-currency deposits, particularly through FCNR (B)-linked fund-raising programmes. The latest entrant is Federal Bank, which on Wednesday received its first-ever international issuer credit ratings from S&P Global Ratings — BBB-/Stable for the long term and A-3 for the short term. The investment-grade rating is expected to strengthen the bank’s access to global debt markets and diversify its foreign-currency funding sources.

The development comes amid a broader trend among Indian lenders looking to shore up foreign-currency liabilities as credit demand rises. YES Bank also secured a fresh international rating from S&P Global Ratings, which assigned the lender a BB+/Stable long-term issuer credit rating and a B short-term rating. S&P cited improving asset quality and strategic support from shareholder SMBC as key factors underpinning the rating.

“Global ratings are increasingly becoming a prerequisite for accessing overseas investors, issuing foreign-currency bonds and mobilising FCNR deposits from non-resident Indians. An international rating provides comfort to global investors and can help banks lower overseas borrowing costs,” said a senior industry official.

The push follows similar moves by other lenders, including Bank of Baroda (BoB), which recently strengthened its international fund-raising framework as banks position themselves to tap overseas markets for capital. BoB is planning to raise up to $1 billion through the issuance of senior unsecured notes, with CareEdge Global Ratings assigning a BBB+/Stable long-term foreign-currency rating to the proposed notes.

Among other Indian lenders, State Bank of India, HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank and Bank of Baroda carry investment-grade international ratings. YES Bank’s BB+ rating places it just one notch below investment grade, while IndusInd Bank remains below the investment-grade threshold based on Moody’s ratings.

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