International rating agency Moody’s on Friday downgraded state-run IDBI Bank’s baseline credit assessment (BCA) to ‘B1’ from ‘Ba3’, driven by asset quality woes.
The agency has also downgraded the bank’s subordinated medium-term notes (MTN) programme and the junior subordinated MTN programme to ‘(P)B1’ and ‘(P)B2’ from ‘(P)Ba3’ and ‘(P)B1’, respectively.
“We consider that IDBI Bank’s standalone credit profile continues to be negatively impacted by its asset quality issues. Its impaired loan ratio rose to 14.7 per cent at end-March 2015 as against 12.16 per cent a year earlier,” it said.
While the pace of new impaired loan formation will slow during the year ending FY16 compared to the levels seen over the last three years, the rating agency expects the rate to remain high.
It said debt servicing metrics of the country’s corporates remain weak.
The agency said a significant amount of corporate loans have already been recognised as impaired loans by the banking system.
However, the rating agency believes that there remains a material amount of loans associated with borrowers with weak financial metrics but which are not classified as impaired loans by the banking system.
