Mumbai: Moody's Investors Service has upgraded the long-term foreign currency bond ratings of ICICI Bank Ltd (Industrial Credit and Investment Corporation of India) to investment grade "Baa3" from "Ba1", reflecting the entity's intrinsic financial strength.

The action concludes the review for upgrade on the institution's foreign currency bond ratings that was announced in November 2002, according to Moody's rating action report.

The review resulted from Moody's decision to upgrade the respective country debt ceiling to "Ba1" from "Ba2" and the rating action is stable.

The ratings of ICICI Bank affected by this action are - senior unsecured $ 150 million bond issue due on August 2007 and the multiple seniority MTN programme.

Moody's said the revised ratings of ICICI Bank addresses the relatively low risk that the particular bank's foreign currency bonds may be affected by a possible general moratorium imposed by the Indian government on foreign currency obligations.

In such a case, the government may choose to allow foreign currency payments by some favoured classes of issuers such as ICICI Bank and this would lead to the debt of such an issuer piercing the country debt ceiling, the agency said.

ICICI Bank's foreign currency debt ratings incorporate bank's stand-alone intrinsic financial strength as expressed by its "D+" financial strength rating (FSR), changing business profile towards retail, strong management as well as some asset quality concerns, Moody's said.

Moody's said ICICI Bank's "too big to fail" features coupled with its importance to the financial system as one of India's main foreign currency borrowers in international capital markets, means that a possible default on its foreign currency obligations would inflict substantial damage on the economy.

The increasing access to retail deposits has enabled the bank to successfully penetrate the relatively untapped market of consumer loans, which were more profitable and also carry a lower credit risk cost compared to the bank's traditional project finance business.

Moody's also notes that the bank's foreign currency deposit ratings are placed at the country ceiling for foreign currency deposits in India (set at Ba2/Not Prime), and that such deposit ratings cannot pierce the respective sovereign ceiling in the way that the bond ratings do.

A FSR of "D+" would normally relate to a deposit rating of at least one notch higher in an unconstrained environment, Moody's added.

The outlook for the bank's foreign currency deposit ratings is negative reflecting the outlook of the respective country ceiling.

PTI