Rural Rating

July 26, 2011 (LBO) - Fitch Ratings Lanka said it has given Sri Lanka's Regional Development Bank, an investment grade rating of 'BBB+(lka)' with a stable outlook on its state ownership, though the bank was still small to be systemically important. "The rating could be upgraded if the systemic importance of RDB to the government increases as evidenced by its increasing market share of rural lending through an enlarged franchise," Fitch said.

"Conversely, the rating would be downgraded if state support to the bank is constrained or reduced or if significant deviations occur in RDB's lending practices away from its core microfinance loan book."

The bank is 100 percent state-owned and was built by consolidating several independent regional lenders. It lends to rural small and micro enterprises. About 39 percent of its book was micro-finance, Fitch said.

The full Fitch statement is reproduced below.

Colombo/Singapore. Fitch Ratings Lanka has assigned Regional Development Bank (RDB) a National Long-Term rating of 'BBB+(lka)'. The Outlook is Stable.

RDB's rating derives support from its 100% state ownership. The rating is however constrained by the bank's relatively small asset base by local standards and, therefore, relatively l