A minus rating for BoR subordinated bonds

By Our Banking Bureau | 13 Oct 2004

1

Mumbai: CARE has assigned a ''CARE A-'' [A minus] rating to the proposed Rs95 crore-Tier II subordinated bond issue of the Bank of Rajasthan Ltd. (BoR).

Instruments with this rating are considered upper medium grade instruments and have many favourable investment attributes. Safety for principal and interest are considered adequate. Assumptions that do not materialise may have a greater impact as compared to the instruments rated higher.

The rating factors in the long track record of operations of the bank, low cost deposit base, improved net interest income and profitability, improving asset quality during the last three years and satisfactory capital adequacy. The rating is, however, constrained by high dependence on treasury profits, relatively higher growth in investments in relation to advances, low level of advances (much lower CD ratio in relation to peers) with moderate credit quality, nascent risk management systems and high interest rate risk associated with the investment portfolio of the bank. The rating also factors the track record of the promoter group.

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