ICRA assigns LAA rating to IOB's Rs 300 crore bonds

New Delhi, Mar 28 (UNI) Rating agency ICRA has assigned a LAA rating to the Rs 300 crore perpetual bonds of Indian Overseas Bank (IOB).

IOB has an outstanding ICRA rating of LAA+ assigned to the Rs 550 crore (conventional) subordinated bonds programme of IOB. The lower rating assigned to the perpetual bonds reflect the specific features of these instruments wherein the debt servicing is additionally linked to meet the regulatory norms on capitalisation and reported profitability.

The domestic regulatory norms for hybrid debt capital instruments need regulatory approvals from the Reserve Bank of India for debt servicing (including principal repayments) in case the bank were to report a loss and are not liable to service the debt norms.

ICRA's ratings for IOB take into account the consistent growth maintained in credit over the past several years, the improvement achieved in its asset quality, and the bank's improving core profitability. The rating also draws comfort from IOB's domestic retail deposit base, its adequate capitalisation and its majority ownership by the Government of India (GoI).

The rating factors in the challenges the bank faces in terms of continuing to adequately manage the credit risk arising out of its substantial exposure to mid-tier corporates and its ability to grow its retail advances portfolio without impacting overall asset quality.

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