The company's capitalization, as measured by equity to assets, had decreased to 9.2 percent at year ended March 2010 from 14.3 percent a year earlier.
But it increased to 13 percent in December 2010 quarter following an equity infusion of one billion rupees from parent Lanka Orix Leasing Company, the rating agency said in a statement.
"The rating may be downgraded if there is no sustained improvement in capitalization," Fitch said.
"The rating is driven by LOFIN's financial strength rather than support from its parent LOLC."
The rating reflected the firms strong franchise among registered finance companies, healthy profitability, good and improving asset quality, as well as a planned improvement in capitalization.
Fitch says, in line with the broader strategy for the LOLC group, most new disbursements are booked at LOFIN instead of LOLC.
"LOFIN recorded significant portfolio growth of 135 percent in the