Mumbai: The Rs 60-crore bonds issue of the State Bank of Mysore (SBM) has been assigned the LAA- rating, indicating high safety. The Investment Information and Credit Rating Agency (ICRA) has assigned the rating. The bonds issue will form part of the tier-2 capital of the bank.

The rating factors are SBMs strong parentage and the eminent position the bank holds in the state of Karnataka, the moderate levels of capitalisation, relatively higher yields on funds deployed, the relatively higher levels of impaired assets and low profitability.

According to an ICRA release, despite higher yields on its advances and investment portfolio, the banks profitability has been low. The profitability was also low due to a relatively high cost-deposit base, provisioning requirements on account of its non-performing assets and a high cost establishment.

The high levels of impaired assets also highlight the moderate levels of capitalisation of the bank. The risk capital ratio stood at 11.6 per cent as on 31 March 2001.