Strongly reacting to S&P's downgrade, SBI chairman MS Verma said this is totally uncalled for. The reason cited for downgrading -- negative factors -- has been there for some time. This situation has not worsened further than it was last time when global rating agencies downgraded India, he further said. SBI chief feels S&P is playing safe. ``I feel S&P is afraid of losing its credibility. It is unable to see how the Indian economy is performing and unable to believe that India will remain isolated from the global phenomenon. Going by the rationale, there is no merit in the downgrade.''

ICICI deputy managing director Lalitha Gupte said there would not be any immediate impact on corporate borrowings becausedomestic corporates have already shifted from external commercial borrowings to rupee borrowings. Internationally, there are lot of uncertainties and the market is volatile. Domestic corporates will not take the risk now. She ruled out the possibility of the repeat of the 1991 situation, when the country's forex reserves were totally depleted.

Crisil director Subodh Shah said, ``S&P has re-rated its old ratings. It has to be seen in the light of what is happening globally. When the global economy is going through a bad patch, it is very difficult for an emerging economy to take corrective steps. For instance, it is not an easy task to bring down current account deficit at this juncture.''

Another public-sector bank chief said when the external environment is negative, the country has to be proactive. Maybe the political uncertainty at the centre and the market condition here have contributed to this situation. As an immediate fallout of the downgrade, the yield on India's corporate papers trading abroadis set to go up by 100 basis points.

ICICI Bank senior executive vice-president PH Ravi Kumar said, ``After Moody's downgrading last time, the yield on Indian papers shot up by 400 basis points over Libor. Subsequently, the papers recovered some ground and are now being offered between 250-300 basis above Libor. I am sure prices will crash; the yield will shoot up to 350 basis point above Libor.''

Another senior analyst with a foreign brokerage house said the trend is now to avoid riskier papers of emerging market. Worldwide, institutions are shifting focus to US treasury bills. Indian papers are bound to suffer, he said.

According to Ravi Kumar, there is no need to panic. The country has cushion in the form of the $4.2-billion Resurgent India Bond proceeds, which will see India through difficult times, he said.