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July 18, 2001
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Money > Business Headlines > Report July 18, 2001 |
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Crisil downgrades IDBI by one notchBS Banking Bureau The Credit Rating Information Services of India Ltd on Tuesday downgraded Industrial Development Bank of India from triple A (AAA) to double A plus (AA+). The one-notch downgrade was triggered by deterioration in asset quality and delay in implementation of the capital restructuring plans of the financial institution. This downgrading will affect the institution's credit worthiness, despite the FI maintaining a rating in the high safety category. Its cost of borrowing may also go up marginally, analysts said. This is the second FI to be downgraded after Industrial Finance Corporation Ltd was downgraded by Icra in July last year from MAA plus to MAA minus due to high non-performing assets. ICICI, the third term-lending institution continues to enjoy a triple A rating. It is under review by global rating agency Moody's for a possible upgrade above the sovereign rating of the country. Speaking to Business Standard, Crisil's director and chief rating officer, Roopa Kudva, said: "This downgrade is a part of our regular reviews on the institution's credit worthiness. It has happened due to asset deterioration which affects the profitability of the institution and the delay in its capital restructuring." IDBI acting chairman SK Chakraborti termed the Crisil downgrading as a "hasty decision". "This is not called for when the economy is going through a lean phase. We have taken all corrective measures and all these are being implemented speedily," he said. The bond programmes and the certificate of deposits programmes of IDBI have been downgraded from AAA to AA+. However, the ratings of fixed deposits as well as term money have been reaffirmed at FAAA and P1+, respectively. The total outstanding in IDBI's balance sheet of non-guarantee bonds is approximately Rs 330 billion. Crisil expects the problems on the asset quality and profitability front to continue in the short term but it expects IDBI to derive strength from its government ownership. The rating agency also acknowledges the institution's efforts to improve its asset quality with measures such as one-time settlement of problem loans and reducing its cost of funds by raising fresh funds in order to repay high-cost borrowings thereby reducing the interest burden. Powered by YOU MAY ALSO WANT TO READ:
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