The corresponding ratings for the long-term foreign currency deposits mobilised by Pakistani banks at `Ca' is three notches below the ratings of Indian banks -- indicating extremely poor financial security.

The rating assigned to long-term foreign currency bonds and notes issued by Pakistani banks is two notches below the corresponding rating for Indian banks, but still indicates poor standing of the issues, which may either be in default or have a very high probability of default.

The rating agency's report has also reaffirmed a `Ba3' ceiling on the long-term foreign currency deposits mobilised by Indian banks and their brancheslocated in the country.

"Both ratings are in the same rating classification and indicate speculative elements for the bonds and notes and questionable financial security for the counter-party in case of bank deposits. The instruments' future cannot be considered well assured and the protection of interest and principal payments could be very moderate," Moody's said. It added that the rating for long-term foreign currency bonds and notes issued by Indian banks is one notch higher than that assigned to the long-term foreign currency deposits mobilised by these institutions.

In a related development, the international rating agency has retained the average bank financial strength rating (BFSR) of India at `E+', implying very weak intrinsic financial strength, "requiring periodic outside support." Incidentally, India ranks 59 among the 73 countries rated on the basis of BSFR.

BSFRs are not intended to measure the risk of credit loss or expected loss, hence they do not replace bond and deposit ratings.BSFRs assess banks' credit profile by excluding factors related to country-risk concerns and regulatory support mechanisms, etc. Instead, they are opinions of a stand-alone risk of a banking enterprise and address aspects of risk familiar to regulatory examiners.

However, market sources expect Moody's to give better ratings once the Kargil conflict is over and Indian economy is back on the rails.