Fitch said the state had a high propensity to support People's Bank due to its systemic importance and had a quasi-sovereign status and full government ownership by the state also had limited ability to provide "extraordinary support" as seen by its 'BB-' sovereign rating.
The five largest exposure on its balance sheet amounted to 219 percent of the bank's equity. While most SOE loans are have state guarantees, credit equal to 88 percent of PB's equity are not guaranteed, Fitch said.
But customers of state-run Ceylon Electricity Board and Ceylon Petroleum Corporation pay their bills to collection accounts of the bank, which are used to finance loans, reducing liquidity risk, Fitch said.
Fitch said the bank's Tier I capital adequacy ratio at 9.8 percent was weaker th