The bank has been assigned A1+ rating and instruments rated in this category carry the lowest credit risk in the short-term, a release stated here today.
Canara Bank already has ratings of LAAA with a stable outlook for its various Lower Tier II bond and infrastructure programmes from ICRA.
Canara's ratings factor in the implicit sovereign support enjoyed by the bank and improvement in asset quality as depicted by the declining credit costs and lower NPA levels, amongst other factors, the release said.
The ratings also take into account the competitive operating cost structure, given the bank's large branch network and the comfortable regulatory capitalisation levels and liquidity position.
Canara's core profitability has been declining as a result of shrinking interest spreads and it has a relatively low core fee-income level.
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ICRA, however, believes that the management's efforts to reduce high-cost deposits and rebalance the credit portfolio could start generating higher interest spreads over the medium-term.