SOVEREIGN LINK Moody’s downgrades LIC, ICICI, Axis and HDFC Bank

Mumbai: Rating agency Moody's has downgraded four financial institutions—Life Insurance Corporation, ICICI Bank, HDFC Bank and Axis Bank—following a change in its credit assessment. 

    The rating agency had earlier warned that these three institutions were set to be downgraded. "The rating actions took place in the context of an ongoing global review affecting all banks whose standalone ratings are higher than the rating of the government where they are domiciled, and they conclude the review that was initiated on 30 April 2012," Moody's said. 

    LIC's downgrade comes in the wake of the government dipping into LIC's resources to recapitalize banks and to bail out the government in its divestment programme. 

    In the case of the banks, Moody's has said that their creditworthiness is highly correlated with that of the Indian government's, taking into account their reliance on market funding and high investment in government bonds. Similarly, in the case of LIC, the rating agency has said that there is little, if any, reason to believe that LIC would be insulated from any government debt crisis, if it were to occur.