CARE assigns 'AAA' to PNB's Upper Tier-II bonds

MUMBAI: CARE has assigned 'CARE AAA' rating to Punjab National Bank's Upper Tier-II bond programme of Rs 2,000 crore, which indicates best credit quality, offering highest safety for timely servicing of debt and minimal credit risk.

The rating draws strength from PNB's strong market position, low-cost deposit base, diversified loan mix, continued growth in operations and strong financial position. The rating also factors in PNB's strong asset quality, comfortable capitalization level and majority ownership by Government. These factors considerably reduce the additional risk of deferral of interest/principal on due dates arising due to existence of lock-in clause in the Upper Tier II Bonds issues. PNB's continuing ability to maintain its asset quality as well as profitability would be the key rating sensitivities.

Upper Tier II bonds are hybrid instruments which are long term in nature and carry a lock-in-clause which provide for deferral of regular interest payment &/or deferral of principal repayment at maturity, under specified conditions.