* Reserve Bank says basis for downgrade "incorrect"
* Moody's: Capitec depends largely on unsecured loans
* Capitec calls downgrade "unfair and inappropriate"
By Tiisetso Motsoeneng
JOHANNESBURG, Aug 16 (Reuters) - South Africa's central bank has disputed credit rating agency Moody's downgrade of Capitec Bank, saying it disagreed with the rationale behind the two-notch rating cut for the local lender.
Moody's cut the financial strength rating of the lender to D from D+ on Friday and deposit ratings to Ba2/NP from Baa3/P-, citing concerns about its exposure to risky consumer lending.
Worries about consumer lending in Africa's most developed economy are growing after the South African Reserve Bank launched a $1.6 billion rescue of African Bank Investments last week.
"While the bank respects the independent opinion of rating agencies, we do not agree with the rationale given in taking this step," Hlengani Mathebula, spokesman for the Reserve Bank said in a statement.
"The Moody's statement justifies the rating action further on the basis that Capitec follows a similar business model to African Bank. This is incorrect, the two lenders do not share the same business model."
Capitec also disagreed with Moody's downgrade, with its financial director calling it "unfair and inappropriate" in a statement issued on Saturday.
"Capitec Bank does not agree with the downgrade and would like to place on record that the business is healthy, growing according to plan, and its loan book is performing within its risk appetite," said Andre du Plessis, Capitec Bank's financial director.
Capitec said that unlike African Bank, which depends almost exclusively on high-margin but risky unsecured loans, it has diverse revenue streams that include more than 5 million banking clients.
About 2.2 million of these clients receive their salaries through the bank, giving the lender insight into their cash flow when considering whether to make loans to them, it said.
No one at Moody's was available to comment on Sunday. It had said on Friday that profits from unsecured loans make up the bulk of Capitec's loan book.
"This narrow undiversified lending focus remains affected by the recent economic slowdown, given reduced consumer affordability and high consumer indebtedness," Moody's said. (Editing by Greg Mahlich)