Canara Bank Scraps Credit Rating Of Deposits

Canara Bank has discontinued credit rating of deposits. The bank, though, will continue to get its long-term liabilities, especially subordinated bonds, rated in line with Reserve Bank of India guidelines.

Sources in the bank said as the bank has a large portfolio of deposits comprising of both demand and time liabilities, a precise rating will not be possible. Besides, like all other banks the deposit profile of the bank has shifted.

Currently most deposit accretion has been taking place at shorter maturities and the long tenure deposits have actually been shrinking, in line with industry trends.

The bank has over Rs 60,000 crore of deposits. Any current methodologies adopted by any rating agency is unlikely to capture the bank's underlying financial strength.

 

Rating agency Crisil, has accorded P1 plus (risk-free category) to Canara Bank's commercial paper and certificate of deposit.

In another development, Moody's Investor Services has sought details of financial performance from Canara Bank even as the bank expects a rating upgrade from the agency because of its improved credit quality.

Sources said that Moody's is expected to meet bank's top officials later this month. Sources said the bank was confident of getting a rating upgrade even though the agency has downgraded the country's rating. Sources said while the country's rating will be taken into consideration, it will not be an overriding factor.

Earlier, Standard & Poor's had accorded a `BBPI' rating for the nationalised Canara Bank indicating that the bank continues to be under the moderate risk category. The `BBPI' is the same rating given to Canara Bank when S&P rated its financial strength in 1998.

Sources said the bank had settled its dues with most of the public sector undertakings, and through a voluntary retirement scheme, the bank had become a leaner and fitter organisation.

Moody's had in its report said its current rating took into account the increasing competitive operating environment and the challenges the bank faces in modernising its operations as well the high level of credit risk that Indian banks have to contend with.

"The bank was weakened in the mid-90s by the failure of its mutual fund scheme and by a fraud case in which its investment banking subsidiary, Canfina got entangled," the report said.