Easy Prey

State-run National Savings Bank’s credit profile could take a beating if the government continues to pump in low interest bearing rupee loans, Fitch Ratings Lanka said in a report on Wednesday. State-run National Savings Bank’s credit profile could take a beating if the government continues to pump in low interest bearing rupee loans, Fitch Ratings Lanka said in a report on Wednesday. The savings giant is currently the third largest bank in terms of assets. The majority of NSB assets (79 percent) are in government securities and loans secured against cash deposits, with wholesale syndicated loans and retail lending making up the remainder.

But over the years, NSB has accumulated a neat pile of non-tradable rupee loans, issued at administratively determined yields.

Some high yielding rupee loans came with a call option, which the government has been exercising since 2003. This effectively reduces the coupon rate and yield to the bank.

NSB’s holding of rupee loans has halved from Rs. 55.6 billion in 2001 to Rs 28.5 billion in 2004 due to maturities, Fitch Ratings said while re-affirming NSB’s AAA (sri) status.

Figures for 2005 are not available, but the Central Bank’s public d