Rating Action
CRISIL upgrades IDBI Bank's long-term bonds rating to 'AA' from 'AA-'
This story was originally published at 06:00 IST on 22 August 2024
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MUMBAI – CRISIL Ratings Ltd has upgraded the rating of IDBI Bank's long-term debt instruments to 'AA' from 'AA-', and retained a stable outlook, the bank informed the exchanges today.
On the bank's 400 bln certificate of deposit, the rating agency reaffirmed the 'CRISIL Al+' rating, the filing said. Further, CRISIL also upgraded the ratings on fixed deposits to 'AA+' from 'AA' with a stable outlook, the filing said.
The upgrade in the rating was mainly due to an improvement in the bank's asset quality, profitability, and a sustained healthy capitalisation over the past few quarters, the rating agency said.
IDBI Bank's net profit during the June quarter increased to 17.19 bln rupees from 12.24 bln rupees a year ago. Gross non-performing assets have declined to 3.87% as of Jun 30 compared to 5.05% a year ago. The Basel III capital adequacy ratio of the bank stood at 22.42% as of Jun 30, against 22.26% a quarter ago.
CRISIL Ratings said asset quality remains vulnerable to macroeconomic factors, and it would continue to monitor the bank's ability to improve asset quality while scaling up its loan book.
"Further, CRISIL Ratings notes that the RBI in its initial approval letter to LIC in November 2018, for acquiring stake in IDBI Bank, had stipulated that either IDBI Bank or LIC Housing Finance Limited, both being associates of LIC, have to cease conducting housing finance business within a period of five years, which has been extended by RBI," the report said. "CRISIL Ratings will continue to closely monitor further developments and its impact on the outstanding ratings of the bank and take appropriate need-based rating action thereafter."
As on Jun 30, Life Insurance Corporation of India has 49.24% and the government has a 45.48% stake in the bank.
The rating agency said that a deterioration in asset quality due to higher slippages and net NPA ratio rising above 5% could lead to a negative rating action. Also, a change in stance of support from the central government or the LIC till the transaction of divestment gets materialised could prove to be a negative factor for the rating, it said.
Today, shares of IDBI Bank closed 0.02% higher at 96.79 rupees on the National Stock Exchange. End
Reported by Christina Titus
Edited by Deepshikha Bhardwaj
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