Fitch rates Regional Development Bank 'BBB+(lka)'

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 less systematic importance compared to other large state-owned banks.

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.

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.

At end-2006, the government announced that it would merge the six regional development banks to form one combined entity. The merger occurred in May 2010, following which RDB re-branded and launched its merged entity's combined operations from its new head office in Colombo.