Moody's downgrades Bank of India, Canara Bank

Rating firm Moody's Investors Service on Monday downgraded state-owned Bank of India (BoI) and Canara Bank a notch down in terms of Baseline Credit Assessments (BCAs), an indication of intrinsic or standalone financial strength of the company.

It has downgraded the BCA of Bank of India and Canara Bank to ba3 from ba2 on account of rise in NPA.

Canara's BCA could be upgraded if there are substantial improvements in the bank's asset quality metrics, Moody's said in a statement.

There could be upward pressure on its BCA if the bank is able to demonstrate access to equity capital markets as well, it added.

The rating agency said that the downward pressure on BOI's BCA could develop from a continued deterioration in impaired loans.

"A material decline in the combination of profits, loan-loss reserves and capital, relative to impaired assets would also put pressure on its ratings," it said.

"Additionally, any indications that support from the Government of India (Baa3 Positive) had diminished or that additional capital requirements may arise beyond government's budgeted amount could put the bank's deposit and senior unsecured debt ratings under pressure," it added.

Moody's has also affirmed the BCA and adjusted BCA of ICICI, Axis and BOB at baa3, baa3 and ba2, respectively.

It has also affirmed the deposit ratings of five Indian banks - Axis Bank, ICICI Bank, Bank of Baroda, BoI and Canara Bank.