CRISIL affirms IDBI''s ratings


Rs36.14billion bonds programme
(Enhanced from Rs30.88billion)
Bonds and certificate of deposit programme
AA+/Stable (Reaffirmed)
Fixed deposit programme
FAAA/Stable (Reaffirmed)
Rs25billion short term debt programme
P1+ (Reaffirmed)

The Industrial Development Bank of India Ltd (IDBI) ratings By CRISIL reflect the high strategic importance which its majority owner, the government of India (GoI), attches to IDBI. This is evident in the development finance role envisaged for IDBI by the parliament, while passing the IDBI Repeal Act, 2003. The government has extended timely support to IDBI in the past, and CRISIL expects such support to continue, should the need arise. Government support significantly improves IDBI's credit profile.

The ratings also reflect the expected improvement in IDBI's market position, resources profile and liquidity profile following its conversion into a bank and its impending integration with its subsidiary, IDBI Bank Ltd.

The benefits of the merger, when effected, would be particularly visible in areas of network expansion, training of employees, introduction of retail asset and working capital products, as well as setting up and effectively utilising a common technology platform. IDBI's capital adequacy and asset quality has improved after it received a stressed asset swap package from the GoI. The rating is, however, tempered by IDBI's continuing stressed asset quality and weak earnings profile.

CRISIL expects IDBI's credit profile to continue to benefit significantly from support by the government of India, given its unique position as the only bank with a focus on development finance. IDBI was converted into a banking company on October 1, 2004 with a focus on development finance and the additional business of commercial banking.

For the eighteen-month period ended September 30, 2004, IDBI reported a profit after tax of Rs5.31billion and had assets of Rs638.46billion. IDBI Bank had assets of Rs138.86billion as on September 30, 2004 and reported a profit after tax of Rs0.74billion for April to September 2004. The pro forma consolidated assets of the merged entity (September 30, 2004) were Rs777.32billion.