IDBI Bank hikes ceiling on MTN borrowing to $5 bn

Fitch assigns investment grade rating of "BBB-"

Public sector lender IDBI Bank has raised the ceiling for foreign borrowing through medium-term notes (MTN) from $3.5 billion to $5 billion. Rating agency Fitch has assigned a ‘BBB-’ rating to the bank’s MTN programme, as well as various tranches of its outstanding senior unsecured notes.

So far, the bank has exhausted about $2.2 billion of the $3.5-billion cap. An IDBI Bank executive said soon, the bank would file revised documents for enhanced limits with Singapore Stock Exchange.

Fitch said it expected the government of India (which has a stake of about 70 per cent in bank) would continue to extend support to the bank, should such a need arise.

On November 25, Standard and Poor’s had cut IDBI Bank’s foreign currency issuer credit rating to ‘BBB-’ from ‘BB+’. The agency had said the bank’s asset quality was expected to remain weak through the next 12-18 months.

Given the bank’s asset concentration, asset quality pressures are likely to continue, particularly on the restructured assets front. At the end of the first half of 2013-14, IDBI reported total stressed assets (gross non-performing loans and performing restructured loans) of 12.4 per cent, against nine per cent at the end of FY13.

However, the Rs 1,800-crore capital infusion expected by end of FY14 should help the bank achieve a tier-I capital ratio of about eight per cent (in FY13, the ratio was 7.7 per cent). However, capitalisation is expected to remain tight.