London: Moody's Investors Service has assigned a higher 'Baa3' rating to Industrial Development Bank of India's (IDBI) proposed 5-year debt issue worth $ 300 million in line with the bank's other existing foreign currency bond ratings.

The Baa3 ratings with a stable outlook are placed at the same level as the foreign currency sovereign debt ceiling assigned to India, which was recently upgraded to Baa3 from Ba1, Moody's said today (Feb 19, 2004).

The debt ratings assigned to Mumbai-based IDBI, having assets worth $ 13.2 billion, take into account its Government ownership and its relative importance to the financial system in India, it said.

Being the biggest development financial institution, IDBI has been the main Government arm in providing financing to various infrastructure and industrial projects in India.

Although its financial position has been deteriorating in recent years, IDBI has been prompt in meeting both its local and foreign currency liabilities, Moody's said.

Majority Government ownership has meant that IDBI was extended support in the form of grants in the past. IDBI enjoys good brand equity in the local debt market, which it taps frequently for funding.

Both IDBI's relative importance and the Government's track record in providing it support are the key drivers behind this rating assignment, Moody's concluded.