 "IDBI Bank to raise Rs 4,000 cr via tier II, infra bonds")
Public sector lender IDBI Bank plans to raise Rs 2,000 crore through infrastructure bonds and a similar amount through Basel III-compliant tier-II bonds.
Rating agency CRISIL has assigned “AA/Negative” rating for both instruments.
R Bansal, the bank’s executive director and chief financial officer, said money raised from infrastructure bonds will be used to finance road projects, renewable energy and affordable housing.
Lenders have to issue infra bonds at least for seven-year tenure. The funds raised from these bonds are exempted from the Cash Reserve Ratio and Statutory Liquidity Ratio.
In March, CRISIL had downgraded the ratings of IDBI Bank’s debt instruments. The asset quality will remain under considerable pressure in the near-term due to the continued weak credit risk profiles of highly leveraged corporates.
Asset quality deterioration is evident from the sharp increase in gross non-performing assets to 10.98 per cent as on March 31, 2016, from 5.88 per cent as on March 31, 2015.
Additionally, there was a large proportion of restructured standard advances of Rs 13,850 crore, constituting 6.1 per cent of advances, as on March 31, 2016 (Rs 16,720 crore, constituting 7.7 per cent of advances as on March 31, 2015).
The recovery from NPAs is also expected to be limited in the near term. This could increase pressure on the bank’s weak profitability, CRISIL said.
For financial year 2015-16, Mumbai-based lender posted net loss was Rs 3,660 crore compared with a net profit of Rs 870 crore in fiscal 2015. This was mainly on account of the sharp increase in provisioning costs to around 2.8 per cent in FY16 from 1.3 per cent in FY15.
CRISIL said it expected that IDBI bank will continue to receive support from its majority owner, the Government of India (GoI), on regular basis and also in the event of distress.
The ratings also take into account it’s established market position, supported by a large asset base and adequate capitalisation.
Its advances of Rs 2.1 trillion as on this date, accounted for around 2.9% of the banking system advances. While the bank has moderated its growth, it is likely to remain among the top 10 banks in India.
Its Capitalisation is adequate, with Tier-I of 8.9 per cent and overall capital adequacy ratio of 11.7 per cent (as per Basel III) at end of March 2016.
Over the past five years, the government has infused total capital of Rs 6,284 crore.
Over the past five years, total capital of Rs 62.84 billion was infused by GoI. Additional capital of Rs 22.3 billion was infused in fiscal 2016 under the Indradhanush plan.
These rating strengths are partially offset by an average resource profile.
Rating agency CRISIL has assigned “AA/Negative” rating for both instruments.
R Bansal, the bank’s executive director and chief financial officer, said money raised from infrastructure bonds will be used to finance road projects, renewable energy and affordable housing.
Lenders have to issue infra bonds at least for seven-year tenure. The funds raised from these bonds are exempted from the Cash Reserve Ratio and Statutory Liquidity Ratio.
In March, CRISIL had downgraded the ratings of IDBI Bank’s debt instruments. The asset quality will remain under considerable pressure in the near-term due to the continued weak credit risk profiles of highly leveraged corporates.
Asset quality deterioration is evident from the sharp increase in gross non-performing assets to 10.98 per cent as on March 31, 2016, from 5.88 per cent as on March 31, 2015.
Additionally, there was a large proportion of restructured standard advances of Rs 13,850 crore, constituting 6.1 per cent of advances, as on March 31, 2016 (Rs 16,720 crore, constituting 7.7 per cent of advances as on March 31, 2015).
The recovery from NPAs is also expected to be limited in the near term. This could increase pressure on the bank’s weak profitability, CRISIL said.
For financial year 2015-16, Mumbai-based lender posted net loss was Rs 3,660 crore compared with a net profit of Rs 870 crore in fiscal 2015. This was mainly on account of the sharp increase in provisioning costs to around 2.8 per cent in FY16 from 1.3 per cent in FY15.
CRISIL said it expected that IDBI bank will continue to receive support from its majority owner, the Government of India (GoI), on regular basis and also in the event of distress.
The ratings also take into account it’s established market position, supported by a large asset base and adequate capitalisation.
Its advances of Rs 2.1 trillion as on this date, accounted for around 2.9% of the banking system advances. While the bank has moderated its growth, it is likely to remain among the top 10 banks in India.
Its Capitalisation is adequate, with Tier-I of 8.9 per cent and overall capital adequacy ratio of 11.7 per cent (as per Basel III) at end of March 2016.
Over the past five years, the government has infused total capital of Rs 6,284 crore.
Over the past five years, total capital of Rs 62.84 billion was infused by GoI. Additional capital of Rs 22.3 billion was infused in fiscal 2016 under the Indradhanush plan.
These rating strengths are partially offset by an average resource profile.
