Moody's Investors Service has upgraded the long-term foreign currency bond ratings of ICICI Bank to Baa3 from Ba1.

This action concludes the review for upgrade on the institution's foreign currency bond ratings that was announced in November 2002; this review resulted from Moody's decision to upgrade the respective country debt ceiling to Ba1 from Ba2.

The rating outlook is stable.

According to Moody's, the revised foreign-currency bond ratings of ICICI Bank address the relatively low risk that the particular bank's foreign currency bonds may be affected by a possible general moratorium imposed by the government of India 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.

This would lead to the debt of such an issuer piercing the country debt ceiling.

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 the international capital markets, means that a possible default on its foreign currency obligations would inflict substantial damage on the economy.

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

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, adds Moody's.

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

The ratings upgrade include the senior unsecured $150mn bond due in August 2007, senior unsecured rating and subordinated rating.