Introduction

A credit rating evaluates the credit worthiness of a debtor, especially a business (company) or a government. It is an evaluation made by a credit rating agency of the debtor's ability to pay back the debt and the likelihood of default. The largest credit rating agencies (which tend to operate worldwide) are:i. Moody's ii. Standard & Poor's iii. Fitch Fitch and S&P use a system of letter sliding from AAA to D. India's credit rating outlook from stable' (BBB+) to negative' (BBB-) from all the largest credit rating agencies. India could become the first of the so-called BRIC economies to lose its investment-grade status, S&P said, sending the rupee and stocks lower.

Impact on two-state owned Banks

State Bank of India BBB to BBB negative Union Bank of India BBB negative to BB positive No impact as such

Borrowing abroad
Borrowing abroad would be expensive

Local borrowing expensive

Hence borrowing from local markets and Government

Expensive Govt and corporate bond yields

Tighter domestic liquidity