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India Ratings and Research on Wednesday downgraded State-run IDBI Bank to AA from AA+ and gave a negative outlook due to challenges arising out of stressed assets and weak capital position.
The rating agency also downgraded various debt instruments of the bank.
The Reserve Bank had recently initiated ‘prompt corrective action’ for the bank on account of higher NPAs and negative return on assets.
“The downgrade in the long-term issuer rating reflects the consistent drop in IDBI’s share of systemic assets as the bank struggles with its asset quality challenges,” the rating agency said in a note.
It said the bank continues to grapple with a weak capital profile and the RBI’s invocation of the prompt corrective action framework would continue to weigh on its share of systemic assets and liabilities.
The bank’s credit costs are likely to remain significantly high over the medium term on account of higher fresh slippages and provisioning requirements on the current stock of stressed assets, the agency said.
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