Concerned with the increased economic crisis led by the national lockdown, S&P Global Ratings on Friday revised the rating outlooks of two private lenders Axis Bank and ICICI Bank from stable to negative, saying that the heightened economic risks being faced by the country’s banking system may affect the creditworthiness of these banks.

“That’s because heightened economic risks facing India’s banking system may affect the creditworthiness of these banks. In our base case, other private sector peers such as HDFC Bank and Kotak Mahindra Bank have stronger asset quality and would be able to withstand the weakness in operating conditions,” it said in a statement.

Speaking about the private lenders’ peers the rating agency said that they have stronger asset quality and would be able to stand in such harsh conditions.

“In our base case, other private-sector peers such as HDFC Bank and Kotak Mahindra Bank have stronger asset quality and would be able to withstand the weakness in operating conditions,” S&P Global said.

It affirmed the ratings on all other banks and their outstanding issuances. The rating agency also revised downward its assessment of the stand-alone credit SACP of Indian Bank by one notch to ‘bb+’.

Meanwhile, S&P also lowered ratings on non-banking finance companies (NBFCs). These NBFCs primarily include including Shriram Transport Finance, Muthoot Finance, Bajaj Finance, Power Finance Corporation and Mannapuram Finance.

“Our rating actions reflect NBFCs facing increasing risks from challenging operating conditions stemming from the COVID-19 outbreak. In our view, the economic risk for Indian financial institutions is rising. Economic conditions have turned adverse due to the COVID-19 pandemic,” it said.

It believes that the banks’ assets quality will deteriorate, credit costs will rise, and profitability will come down.

“While Indian banks are not entering this slowdown from a position of strength, they have been on the recovery path for the past 12-18 months. The economic slowdown will defer the improvement by a year, in our opinion,” the rating agency said.