NEW DELHI (TIP): International credit ratings agency, Moody’s Investors Service today downgraded state-owned IDBI Bank’s rating citing asset quality concerns and extremely weak capitalisation.

The rating actions reflect the significant deterioration in IDBI’s financial profile, driven by asset quality issues and the heightened risk to its solvency position, the ratings agency said.

The local and foreign currency bank deposit ratings has been downgraded to ‘Ba2/Not Prime’ from ‘Baa3/Prime-3’, Moody’s said, adding the ratings are under review for further downgrade. Separately, IDBI Bank said the government, which has infused Rs 1,900 crore in the lender this year, continues to support it.

The bank added it plans to raise capital through sale of non-core assets and churning of corporate loan book. Moody’s said over the next 12-18 months, asset quality issues of IDBI bank are likely to persist, which will put pressure on the bank’s profitability and limit its ability to generate internal capital.

At the end of March 2017, IDBI’s impaired loans (nonperforming loans plus standard restructured loans) ratio rose to 29% versus 19% a year earlier. In addition, loan loss reserves, when adjusted for the restructured loans, stood at about 34% at the end of March 2017 — which was one of the weakest among Moody’s-rated public sector banks in India, the US-based agency said.

Source: PTI