INSUBCONTINENT EXCLUSIVE:
downgraded the corporate family rating (CFR) and the foreign-currency senior secured rating of Indiabulls Housing Finance Limited to B2 from
Ba2, after the Reserve Bank of India rejected its proposed merger with Lakshmi Vilas Bank earlier this month.According to Moody's rating
rationale, the downgrade was driven by Indiabulls' ongoing challenging access to funding."The proposed merger with Lakshmi Vilas Bank would
have provided a vote of confidence on governance, as it would have meant that the company passed the regulator's fit and proper criteria
Hence, the rejection by the Reserve Bank of India of this proposal on October 9 is a credit negative," Moody's said.Besides, the rating
agency reasoned that the "governance considerations were also a key driver of this rating action
The company's access to funding remains challenging
The continued decline in on-balance sheet loans is a reflection of its funding challenges."The agency also said that "while access to
funding remains challenging, its pool of liquid assets, ability to run down the loan book and roll over of its bank funding act as a buffer
against this risk in the short-term
However, as the funding challenges prolong, the liquidity buffers may erode and expose the company to funding and liquidity risks.""This is
the key driver of the rating action," Moody's said.Perceptions of weak governance, Moody's said, have an impact on the credit profile by
impeding access to funding
the default of IL-FS in September 2018.Get Breaking news, live coverage, and Latest News from India and around the world on
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