Scaling up, managing risks key to rating Ratnakar Bank: Icra

The bank's asset quality was fairly sound, with low slippages, strong recoveries and robust balance sheet growth, Icra said

The ability to scale up business volumes while managing the associated risks would be a key to rating Ratnakar Bank in the future, rating agency Icra has said.

It affirmed the ‘A1+’ rating for the Kolhapur-based lender’s certificates-of-deposits programme (Rs 1,000 crore) and assigned an ‘MAA-’ rating with a stable outlook to the fixed-deposit programme. The ratings take into consideration the bank’s long track record, experienced senior management team and a strong regulatory capitalisation level of 17.11 per cent (March 2013).

Recently, the bank signed an agreement to acquire certain portfolios and businesses of Royal Bank of Scotland’s Indian branches.

Through the last few years, Ratnakar Bank’s asset quality was fairly sound, with low slippages, strong recoveries and robust balance sheet growth, Icra said in a statement. In March this year, the bank’s gross non-performing assets (NPAs) stood at 0.4 per cent, against 0.77 per cent a year earlier. Net NPAs fell from 0.15 per cent to 0.1 per cent.

Gross advances grew 54 per cent in 2012-13 to Rs 6,376.21 crore. The portfolio is fairly diversified across sectors, with non-banking financial companies accounting for the majority of advances (11.45 per cent as of March 2013). Icra said its rating factored in the decline in net interest margin —from 3.58 per cent in 2011-12 to 2.55 per cent in 2012-13 — due to higher costs of funds and increased leverage of capital in 2012-13.

The share of low-cost current account and savings account (Casa) deposits declined — from 22 per cent in March 2012 to 20 per cent in March this year.

The bank also recorded a high proportion of advances from Maharashtra, Karnataka and the Delhi National Capital Region.

Given the bank is in a growing phase, its operating costs are high.