SBI chief says rating upgrade a thumbs up to reforms, to make foreign funds cheaper

Kumar described the move as a "re-affirmation of how the world views India, which has been long pending and a thumbs up to the various reform measures," and added as a result, "the cost of foreign borrowings will automatically come down, which in itself is a big benefit for the country."

Stating that the upgrade was "much expected", he said, "in fact, always the question was why the rating upgrade wasn't happening... it also shows the views on our economy and reforms are more positive outside than within the country."

Talking to the press on the sidelines of the two-day Asian Bankers Association summit, hosted by SBI for the first time in the lobby group's 34 year history here, he said he also expects the rating of SBI to go up reflecting the higher sovereign ratings.

"SBI was always constrained by the country rating. As and when the SBI's next review happens, we will also expect that State Bank gets a higher rating. Our review happened just recently where the ratings were reaffirmed. In my view, SBI's rating and that of the sovereign should not be different."

He further stated the rating upgrade "gives a thumbs up to the economic prudence and reforms that government has initiated. Some of these reforms are mind-boggling, which have brought some difficulties in the transition period, but ultimately, there is no gain without pain.

"And those pains are behind us now and it is time for some gains. These gains are real," Kumar said, adding banking reforms through recapitalisation and the Insolvency & Bankruptcy Code and the GST rollout are the most notable reforms that enabled this upgrade.

From a foreign investors' perspective the upgrade will help "raise their investment limits because it all depends on the country rating, and sometimes, even if they desire to invest, they get constrained by the country rating," he said.

Earlier in the day, American rating agency Moody's raised sovereign rating of the country by a notch to Baa2 with stable outlook. The news boosted the market that rallied over 1.3 per cent and lifted the Bankex up to 6 per cent.

Shares of PNB surged 6 per cent, Bank of Baroda soared 5.17 per cent, Yes Bank gained 4.16 per cent, SBI (3.91 per cent) and ICICI Bank (3.55 per cent) on BSE in the morning trade. While Axis Bank gained 2.64 per cent, HDFC Bank went up by 1.18 per cent.