Credit Analysis & Research (CARE) assigned 'AA+' ratings to Dena Bank's Tier II Bonds (Basel III compliant) of Rs 8 billion.

Tier II Bonds under Basel III are characterized by a 'Point of Non-Viability' (PONV) trigger due to which the investor may suffer a loss of principal. PONV will be determined by the Reserve Bank of India (RBI) and is a point at which the bank may no longer remain a going concern on its own unless appropriate measures are taken to revive its operations and thus, enable it to continue as a going concern.

In addition, the difficulties faced by a bank should be such that these are likely to result in financial losses and raising the Common Equity Tier I capital of the bank should be considered as the most appropriate way to prevent the bank from turning non-viable. 

In CARE's opinion, the parameters considered to assess whether a bank will reach the PONV are similar to the parameters considered to assess rating of Tier II instruments even under Basel II. CARE has rated the Tier II bonds under Basel III after factoring in the additional feature of PONV. 

The ratings factor in the strong parentage Government of India (GoI) holds 66.57% stake in the bank) as well as expectations of future capital support, comfortable liquidity profile, moderate capitalization levels and profitability. The ratings are however constrained by deterioration in asset quality parameters, rising stock of restructured portfolio and sensitivity of profits to market risks. Continued ownership and GoI support, asset quality & profitability are the bank's key rating sensitivities. 

Shares of the company declined Rs 0.05, or 0.10%, to trade at Rs 51.56 at the BSE (3 p.m., Monday).